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 on MetaTrader 4.
XAUUSD Margin, Margin Required, Equity, Used Margin & Free margin
What's Margin Required? : It is the amount of money your broker requires from you to open a position. It's expressed in percentages.
What's Equity? : It is the total sum of trading capital you have in your account.
What's Used Margin? : amount of money in your trading account which has been already used up when buying a gold lot, this contract is the one that is displayed in the open trade positions. As a trader you can't use this amount of money after entering a trade because you have already used it & it is not available to you.
In other words, because your online broker has opened up a trade transaction for you using the capital you have borrowed, you must preserve this usable margin for your trading account as a collateral to allow you to continue using this leverage he has given to you.
What's Free Margin? : amount in your account that you can use to execute new transactions. This is the sum of money in your trading account that has not yet been leveraged because you have not yet opened a transaction with this money - this money also is very important for you because it enables you as a trader to continue holding your open transactions as will be explained below.
Example of How is Margin Level Calculated on MT4?
The margin example on MetaTrader 4 Platform below, the set leverage is 100 : 1, the margin which is 1 % 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 percent of their trading capital, this 1 % equals to $2683.07, if 1 % is equivalent to $2683.07 then 100 Percent is equal to $268,307
MetaTrader 4 Leverage Margin Calculation - How is Margin Level Calculated?
XAUUSD Margin - $2683.07
XAUUSD Margin used to open trades in MetaTrader 4 examples above
This Margin is 1% of the trade opened on the MT4 software
To Learn & Know More about Leverage & Margin - Read the Topics Below:
Leverage & Margin Discussed
