What is Initial Margin?
Definition of Initial Margin: It is the first deposit of the collateral needed by the dealer or a broker that extends the leverage or margin to the Forex trader or an investor for entering the required position. Money is regarded as a hedge for covering the dangers associated with credit and plays the role of a guarantor on the performance in the future. A starting margin may be a good deposit that is needed to activate an account, whether you utilize the brokerage firm or if you administer your self account. Thus, the collateral level needed on the starting margin until the post is closed down is the requirement of the maintenance. This requirement is regarded as a minimum amount that has to collateralize for keeping an open position. Generally, it is lower when compared to the initial need. This permits the cost to go against the edge without forcing the margin call instantly after the first transaction. To avoid risks, the exchange, the broker or the regulators may plan a maintenance need higher than the normal to the first requisite to lessen their introduction to the danger that a trader accepts.