Excess Margin Deposit

AAA

DEFINITION of 'Excess Margin Deposit'

Funds deposited in a trading account beyond what is required to fund basic margin requirements. The total balance on the account equals excess margin deposits plus margin. Investors can typically open an account and start trading with only a percentage of the total security value deposited. This is called trading on margin.

INVESTOPEDIA EXPLAINS 'Excess Margin Deposit'

In the forex market, an excess margin deposit may arise due to a currency trade returning to profitability after the trader has pumped in additional margin because of an earlier margin deficiency. It can also arise through a currency trade becoming significantly profitable shortly after initiation.


Traders may withdraw excess margin deposits if they reach a significant level, since excess capital in margin accounts pays little or no interest. However, nominal amounts of excess margin deposits may be left in the trading account as a cushion against margin calls triggered by adverse price movements.

RELATED TERMS
  1. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  2. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  3. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  4. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  5. Forex - FX

    The market in which currencies are traded. The forex market is ...
  6. Ceded Reinsurance Leverage

    The ratio of ceded insurance balances to policyholders’ surplus. ...
Related Articles
  1. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  2. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  3. Investing Basics

    7 Investing Mistakes And How To Avoid Them

    No investor is flawless. Here are some common investing fallacies and a step-by-step guide on how to avoid them.
  4. Options & Futures

    Getting Started In Forex

    Before entering this market, you should define what you need from your broker and from your strategy.
  5. Forex Education

    Forex: Should You Be Trading Trend Or Range?

    In FX, it's not the price environment that decides this for you. Learn the differences to see which you prefer.
  6. Active Trading Fundamentals

    20 Rules To Trade More Professionally

    Break free from the pack and join the professional minority with an approach that raises your odds for long term prosperity.
  7. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 1000 set up special trading opportunities that take advantage of shifting crowd psychology.
  8. Trading Strategies

    How To Make The Most of Fibonacci Grids

    Build your Fibonacci skills by finding the longest price swing on your chart of interest and placing a grid over the trend. Repeat at shorter intervals.
  9. Trading Strategies

    You'll Lose Profits Without This Trading Strategy

    A trading edge defines your technical or strategic advantage in the highly competitive market environment.
  10. Investing

    Ready To Invest In Financial Leverage Funds?

    Whenever you invest in a leveraged financial fund or are thinking about doing so, it's important to know the risks that could weigh on its returns.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center