Margin Trading allows you to buy and sell currency for currency without actual currency exchange. All deals are held on base of netting, i.e. offsetting of debts, without delivery of actuals.
The purpose of Margin Trading is currency arbitration and a withdrawal of an exchange rates difference.
One of the conditions of Margin Trading is an arrangement of a pledge or a margin on the bank account by the customer. This pledge or margin will be considered as a guarantee or customer’s arbitration transactions. This means that trader cannot loose more than the amount of a margin.
The second feature of Margin Trading consists in a granting of so-called leverage. Leverage is a certain coefficient, a ratio between maximally allowed amount of traded currency and size of a margin.
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It is very important for a person interested in currency transactions to realize a significant difference between “speculation” and “investment”. Inherently, exchange trading is a speculative activity. Foreign exchange markets are the most unstable markets in the world. When trading is held with a usage of margin, the trading cannot become stable.