Do you think there is nothing to do in the Forex market without having thousands in your banking account? Think again, because this IQ Option Forex Margin Trading Guide will give you a new vision.
Recently, IQ Option introduced new Forex with margin trading functionality. This allows you to trade on a professional level even without having a lot of money by borrowing funds from the broker. In other words, margin trading allows you to increase the deal’s potential — but it also increases potential risks.
First, let’s find out how IQ Option’s new Forex is different from CFD trading.
- With margin Forex, you can borrow money from the broker. This is called leverage.
- The borrowed funds are secured by a pre-agreed amount called margin (from 0.2% of the deal). This amount will be “frozen” on your balance to cover the broker’s risks.
- Margin Forex is traded in lots instead of dollars/euros/etc. A lot is a currency unit, 1 lot equals 100,000 units of the base currency.
IQ Option Forex Margin Trading Guide: How does margin trading work?
Margin trading is backed by a very simple logic familiar to everyone who has ever bought something with a loan: a house, a car, etc. In this case, you pay a certain amount yourself and borrow the rest from the bank. Of course, the bank doesn’t want unnecessary risks, so it takes your purchase (house or car) as collateral. If you fail to pay off your debt, the bank will take the purchase to get its money back.
In Forex, the bank is called broker, the loan is called leverage, and the collateral is called margin.
Understanding leverage
IQ Option offers a margin of up to 1:500. It means that you can open a Forex deal as you normally would but control x500 of your actual investment. For example:
Your investment: $10
Leverage: 1:500
You control: $5,000
That is, in case of a successful deal, your profit will be significantly higher than it might be — and so will the potential loss. The broker’s risks will be covered with margin.
Understanding lots
As mentioned earlier, one big difference of margin Forex is that currencies are traded in lots — specific amounts that are classic for the Forex market. A lot is the transaction amount, i.e., the number of currency units you will buy or sell. You can trade 1, 0.1, 0.01, or 1.001 lots.
1 lot (standard) =100,000 units of the base currency
0.1 lot (mini) =10,000 units
0.01 lot (micro) = 1,000 units
0.001 lot (nano) = 100 units
For example, if you buy a EUR/USD nano-lot at 1.1838, you buy 100 EUR for 1.1838 X 100 = 118.38 USD per lot.
Understanding margin
Margin is the amount of your funds required to open a leveraged position. In other words, it’s a deposit on your trades expressed in percentage that will be frozen on your balance. It’s calculated in the base currency.
The minimum margin requirement at IQ Option is 0.2%. However, it may vary depending on the trade size and is calculated according to the formula:
Margin = Lot size × Contract size / Leverage
For example,you buy 0.001 lots (1,000 units of the base currency) of the EUR/USD. Your leverage is 1:50. The contract size always equals 100,000 units of the base currency for any trade.
Your margin = 0.001 x 100,000/50 = 2 EUR
This amount of 2 EUR will be deducted from your balance only when you close the deal. Fortunately, you don’t need to calculate the margin amount every time you open a trade — the platform will calculate it automatically.
Margin Forex interface
IQ Option margin Forex interface is slightly different from the CFD one. Aside from lot trading and margin functionality, the new Forex has an improved trading portfolio with detailed information about your positions. You can manually select the metrics that are important to you in the Table settings section.
The Portfolio section stores complete asset information, such as the name, type, trade creation date, trade size and direction, Take-Profit and Stop-loss levels, asset price, swap, results in %, Gross/Net P/L, the current Profit/Loss ratio, etc.
The new Forex interface also displays additional details for higher investment transparency. Before you open a new trade, the system will highlight all the important data, such as price, SL/TP, spread, margin, leverage, swap, etc. Once the deal is closed, the system will show you your Profit/Loss reflected in pips and money.
Margin Forex conditions
IQ Option’s new Forex features 120 currency pairs to trade, from majors to rare combinations, with spreads starting from 0.7 pip and zero swap.
The minimum investment for the new Forex is a nano-lot (0.001 lot).
The leverage goes as high as 1:500 (varies depending on the asset). The minimum margin requirement is 0.2%.
The minimum withdrawal amount is $2 or an equivalent in your account currency. Traders are in for 1 free withdrawal per month. All the subsequent ones will come with a 2% fee (yet no more than $30). Normally, the request is processed within 1-3 days.
How to trade Forex on margin
- Register and IQ option account
Margin Forex trading is available to all new IQ Option users registered after July 28, 2021. All traders have access to both Real and $10,000 Demo accounts by default. The demo account is available immediately after registration.
- Make a deposit
If you want to make real trades in the real market, you need to make a deposit first. The minimum deposit amount is $10 or the equivalent in your account currency. There is no commission on deposits on the broker’s side unless your payment system provider charges some fees for transactions.
To fund your account, click the Deposit button in the upper right corner of the Traderoom. Then, select a payment method, enter the investment amount, and press Continue.
- Open a margin Forex deal
1. Choose a currency pair you want to trade.
2. Specify the trade size in the Quantity box in the right-side panel. The pip value for the chosen asset and margin for your trade will be calculated automatically.
3. Set up Take-Profit and Stop-Loss. When trading Forex on margin, you’re in for higher profits and higher risks. This is why you should take risk management particularly seriously. SL and TP will auto-close your position once it reaches a certain level of profit or loss.
5. Apply technical indicators. Technical analysis is crucial for Forex trading — choose from over 100 indicators in the Indicators tab in the bottom left corner of the Traderoom.
Forex traders prefer to use MACD, RSI, Bollinger Bands, Stochastic Oscillator, and Parabolic SAR for analyzing the Forex market. Feel free to go with the default settings if you are a beginner or change the parameters to make the indicator more sensitive to market fluctuations.
6. Consider the fundamental factors. Go tothe Market Analysis section on the left-side panel and use the news feed and a Forex calendar with important upcoming events for fundamental analysis.
6. Press Buy or Sell. Before making a final decision and opening a trade, hover the mouse over the BUY and SELL buttons to see the details.
7. Close the position. It will get closed automatically either when it reaches the predetermined Take Profit or Stop Loss level or when your margin level goes below 50% (it’s called margin call).
You can close the trade manually at any moment from the Portfolio section of the User Panel on the right or by clicking the little arrow in the bottom right corner of the screen.
To close the position, press the X button in front of theasset and then press V to confirm the action.
Conclusion
IQ Option’s new Forex interface facilitates margin trading, i.e., trading with leverage. It allows traders to control larger amounts than they actually have — up to 1:500, depending on the asset. Margin Forex is traded in lots, features tight spreads, over 100 currency pairs, low minimum deposit, and easy withdrawal. This functionality increases your exposure to the market and your deals’ potential, yet also amplifies risks and losses. We hope that this IQ Option Forex Margin Trading Guide will help you.
