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Find out how much margin is required to open your trading position
Leverage gives a trader the ability to control a larger position using less money or margin. While this can provide the ability to increase larger profits, it also means trades can result in larger losses. This is why leverage is known to be called a “double-edged sword”. Leverage trading is also commonly referred to as margin trading.
Margin is the money you must put up as collateral to open a new position. It’s not a fee or cost and it is only freed up again once the trade is closed.
Leverage is often described as a ratio. For example, if you have a leverage of 50:1, that means for every $1 you have in your account, you can place a trade worth up to $50. Let’s say you open a position with a forex pair with a leverage of 50:1, so for every $100 you have in your account you can place a trade worth up to $5000, and so forth.
Now with the same example in mind, if the margin requirement to open a trade size of 0.01 lots on GBP/USD is $1,000 without leverage, and a trader uses 50:1 leverage, then the trader only needs to put $50 as margin.
STEP 1
Select Instrument: You may choose from major and minor pairs, including several forex crosses. Additional pairs available include top indices, metals, energy (such as gold, silver and oil) and popular cryptocurrencies such as BTC, DOGE, ETH, LTC, XRP, etc.
We will use GBP/USD in our example.
STEP 2
Select Deposit currency: Margin amounts vary depending on the instrument pair and are subject to the current market price. Choosing the deposit currency will accurately show how much margin is required to open a trade for the selected trading instrument and chosen currency.
We will select USD as our deposit currency for our example.
STEP 3
Select Leverage: Choose the leverage ratio in this field. For example, you may choose leverage from 1:1 up to 500:1 to calculate your amount of margin used to open a trade.
In our example, we will choose 50:1 leverage.
STEP 4
Select Lots (trade size): Here you can type in your lot size. Keep in mind, 1 standard lot is equal to 100,000 currency units in forex, but units per lot can differ for non-forex pairs. There is also an option to switch between lots and units for the calculation.
We will choose a trade size of 0.20 lots. Click the “Calculate” button next to finish.
STEP 5
Results: By using all the data from above, the margin and leverage calculator shows us that if we open a trade position, buy or sell, of a 0.20 lot GBP/USD, with 50:1 leverage and the current GBP/USD exchange rate of 1.23347, our required margin is $493.39 USD.
We recommend reviewing our Margin & Leverage article, which provides useful information to help traders understand what is leverage in forex trading and how to use it more effectively in FX trading, how leverage affects trading account capital, and much more.
EXAMPLE 1
Trading 4 lots on GBP/USD using 1:200 leverage with an account denominated in USD.
Trade size:
400,000
Account currency exchange rate:
1.23347
Required Margin: 400,000 / 200 * 1.23347 = $2466.94
For forex currency pairs, the margin calculation works as follows:
Required Margin = Trade Size / Leverage * account currency exchange rate (if different from the base currency of the pair traded)
EXAMPLE 2
Trading 1 lot (100 Oz) of GOLD (XAU/USD) using 1:200 leverage with an account denominated in USD.
Trade size:
100 Oz
Market price:
1904.76
Required Margin: 100 / 200 * 1904.76 = $952.38
For metals, the margin calculation works as follows:
Required Margin = Trade Size (0z) / Leverage * Market Price
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Risk Warning: Margin trading involves a high level of risk, and may not be suitable for all investors. You should carefully consider your objectives, financial situation, needs and level of experience before entering into any margined transactions with Baxia Markets, and seek independent advice if necessary. Forex and CFDs are highly leveraged products which mean both gains and losses are magnified. You should only trade in these products if you fully understand the risks involved and can afford losses without adversely affecting your lifestyle (including the risk of losing the entirety of your initial investment). You must assess and consider them carefully before making any decision about using our products or services.
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Baxia Limited is a company registered in The Bahamas with registration number: 177330 B, and is licensed and regulated by The Securities Commission of The Bahamas (SCB), (SIA-F234).
The information on this website is general in nature and doesn’t take into account your personal objectives, financial circumstances, or needs. It is not targeted at the general public of any specific country and is not intended for distribution to residents in any jurisdiction where that distribution would be unlawful or contravene regulatory requirements. Baxia Markets does not offer its services to residents of certain jurisdictions such as USA, Cuba, Sudan/Republic of Sudan, Syria, Iran, Iraq, South Sudan, Venezuela, Libya, Belarus, Afghanistan, Myanmar, Russia, Crimea, Donetsk, Luhansk, Palestine, Yemen, Zimbabwe and North Korea.