Margin Level in Commodity Trading Example

We shall first explain the various commodity trading margin levels used in commodity trading platforms and then explain what commodity trading margin level is using an example on MetaTrader 4 software.

Commodities Trading Margin, Margin Required, Equity, Used Commodity Trading Margin & Free margin

What is Margin Required? : It is the amount of money your commodity broker requires from you to open a position. It is expressed in percentages.

What is Equity? : It is the total amount of capital you have in your account.

What's Used Commodities Margin? : amount of money in your account which has already been used up when buying a commodity lot, this contract is one that is displayed in open trades. As a trader you can not use this amount of money after opening a trade order transaction because you have already used it and it isn't available to you.

In other words, because your commodity broker has opened up a position for you using capital you've borrowed, you must maintain this usable margin for your account as a security to allow you to continue using this commodity leverage he has given you.

What is Free Commodities Margin? : amount in your trading account which you can use to open new trade positions. This is amount of money in your trading account that has not yet been commodity leveraged because you've not yet opened a trade with this money - this is also very important for you as a trader because it enables you to continue holding your open trade transactions as explained and illustrated below.

Example of What are the Commodity Trading Margin Levels in MT4

The commodity margin example on MT4 commodity trading Software below, the set commodities leverage ratio is 100:1, the commodity margin which is 1% is $2683.07, therefore the total amount controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest, with this set at 100:1, trader is using 1 % of their capital, this 1% equals to $2683.07, if 1% equals to $2683.07 then 100% is $268,307

How is Commodity Trading Margin Level Calculated?