Understanding Margin-Based Trading
From FXPedia
To ensure that your trading account can withstand the risk of potential losses, brokers require you to maintain collateral in your account. This collateral is referred to as margin and you must maintain sufficient margin to safeguard your trades. Should your account move to a position where your margin is insufficient, you will receive a margin call requiring you to deposit additional funds to bring your account back up to the minimum margin level. Before engaging in any form of margin trading, you must be aware of the risks involved in this form of trading.
Limiting Risk Using Stop-Loss Orders
To limit downside risk, you can specify a stop-loss order for each open trade in your account. The stop-loss provides instructions that automatically close the order when the exchange rate for the currency pair reaches the threshold you specify - you can modify this threshold at any time as long as the order is still pending. For long orders, the stop-loss is set below the current exchange rate, while for short order positions, the stop-loss will be set above the current exchange rate.
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