Margin

Banks and/or online trading providers need collateral to ensure that

theinvestor can pay in the event of a loss. The collateral is called the

“margin” and is also known as minimum security in Forex markets.

In practice, it is adeposit to the trader's account that is intended to

cover any currency tradinglosses in the future.Margin enables

private investors to trade in markets that have high minimumunits 

of trading, by allowing traders to hold a much larger position
 than theiraccount value. Margin trading also enhances the rate of

profit, but  similarlyenhances the rate of loss, beyond that taken
without leveraging.

Maintenance Margin

Most trading platforms require a “maintenance margin”
be deposited by thetrader parallel to the margins deposited
for actual trades. The main reasonfor this is to ensure
the necessary amount is available in the event of a “gap”
or “slippage” in rates. Maintenance margins are also used to
coveradministrative costs.When a trader sets a Stop-Loss rate,
most market makers cannot guaranteethat the stop-loss will actually
be used. For example, if the market for aparticular counter currency
had a vertical fall from 1.1850 to 1.1900 betweenthe close and

opening of the market, and the trader had a stop-loss of 1.1875
,at which rate would the deal be closed? No matter how the rate
slippage isaccounted for, the trader would probably be required
to add-up on his initialmargin to finalize the automatically closed
transaction. The funds from themaintenance margin might be used for this purpose. 

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