What's Commodities Trading Margin?
Margin is the amount of money required by your commodity broker so that to allow you to continue trading with the borrowed amount in your commodities trading account.
In other words the question what is margin in Commodity Trading? can be described as money required to cover open commodities trades and is expressed in percentage. For 100:1, the amount you will control is 100,000 dollars if your commodity account capital is $1,000.
Now can i compare someone investing $1,000 with another one investing $100,000? Obviously Not. This is how it works, it takes you from that guy investing $1,000 to that one investing $100,000. Where does this extra money come from? You borrow from your commodity broker in what's simply known as Commodity Trading Leverage. This money that you borrow, you borrow it against the $1,000 dollar of your own that you deposit with your commodity broker when you open a commodities trading account. If you were to explain what this means - then it is the ability to control a large amount of money using very little of your own money and borrowing the rest. Otherwise, if you were trade Commodity Trading without this commodity trading leverage it would not be as profitable as it is, in fact you can still choose not to use commodities trading leverage, using the 1:1 commodity leverage option but you would not make money it would take too long to make any profit in commodities trading.
Examples of how to calculate Margin:
Commodity Margin required in this case is 1,000 dollars (your money) if it's expressed as a percent of 100,000 dollars which you control it is:
If leverage = 100:1
1,000 / 100,000 * 100= 1%
Commodity Trading Margin required = 1%
(1/100 *100= 1%)
How to Calculate Margin - What is Margin?
