How is Margin Level Calculated?

We shall first explain the different margin trading terms used in platforms and then explain how margin level is calculated using an example in the MetaTrader 4.

XAU USD Margin, Margin Required, Equity, Used Margin & Free margin

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

What is Equity? : It is the total sum of capital you have on your account.

What's Used Margin? : amount of money on your trading account that has already been used when opening a gold lot, this contract is the one that's shown and displayed in the open positions. As a trader you can't use this amount of money after entering a trade because you have already used it & it's not available to you.

In other words, because your broker has opened up a trade position for you using the capital you've borrowed, you must preserve this usable margin for your account as a security collateral to allow you the trader to continue using this leverage the broker has assigned to you.

What's Free Margin? : amount in your account which you as a gold trader can use to execute new trade transactions. This is the sum of money on your trading account that has not yet been leveraged because you haven't yet opened a trade with this money - this money also is very important for you because it enables/facilitates you as a trader to continue holding your open trade positions as will be shown below.

Explanation of How is Margin Level Calculated on MT4 Platform?

The margin example on MT4 Platform Software below, the set leverage is 100 : 1, the margin which's 1 percentage is $2683.07, hence the total sum controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest of the amount, with this set at 100:1, the trader is using 1 percentage of their trading capital, this 1 % equals to $2683.07 dollars, if 1 % is equivalent to $2683.07 dollars then 100 % is equal to $268,307

Example of How is Margin Level Calculated on the MT4 Platform? - Explanation of Margin in MetaTrader 4 Platform Software Explained