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October 31, 2018, 10:14:51 AM |
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Margin trading is the purchase of a contract to buy or sell an asset at some time in the future. The asset does not need to exist at the time the contract is purchased. You need to leave a deposit with the broker to cover the cost of an adverse movement, and this is called the margin. The contract is closed when you purchase another contract in the future to satisfy the terms of the first contract. Any difference in price is your profit ( less brokerage fees ). A margin call is a request from your broker to cover losses when they approach the margin you deposited when the first contract was agreed.
Pyramiding is a method to increase the size of your original position by using the profits to provide a margin for additional contracts. An "uncovered bear" is a speculator who contracts to sell assets that are not owned at the time the contract is opened. A "bear squeeze" is a condition in a rising market where the bears are forced to buy assets at a loss to avoid further losses, and this in turn causes a further increase in the price to force more bears to sell.
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