How leverage works (MODUL 5-8-1)

Your Account Agreement with your dealer is crucial. Just as you wouldn’t consider buying a house or a car without carefully reading and understanding the terms of the sale, neither should you establish a forex account without first reading and understanding the Account Agreement and all other documents supplied by your dealer. You should know your rights and responsibilities, as well as the firm’s obligations before you enter into any forex transaction.

For example, if you are not willing or able to pay the full price and take delivery of the currency, make sure the Agreement gives you the right to enter into an offsetting transaction with the dealer. In other words, the Agreement should require the dealer to buy back any currencies you previously bought or to sell you any currencies you previously sold. Otherwise, you may be responsible for paying the value of the entire forex contract and accepting the foreign currency.