What is the Formula Used to Calculate Margin?

The following commodity trading terms are used in the formula of how to calculate commodity trading margin.

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

What is Margin Required? : It is 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've in your commodities trading account.

What's Used Commodities Trading Margin? : amount of money in your commodities trading 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't use this amount of money after opening a commodity trade because you have already used it to open another trade and it is not 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 Trading Margin? : amount in your commodities account which you can use to open new trade positions. This is amount of money in your account that has not yet been commodity trading leveraged because you have not yet opened a transaction with this money - this is also very important for you as a trader because it enables you as a trader to continue holding your open commodities trades as will be described below.

Example of Formula for How to Calculate Commodity Trading Margin 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

What is the Formula Used to Calculate Commodities Trading Margin?