How Do You Calculate Margin Requirements in Forex? - Calculate Margin Required in Forex Trading
Three example of how to calculate the margin requirement in forex trading.
Now if Your Trading Leverage is 100:1
When trading if you have $1,000 dollars & use leverage option of 100:1 & buy 1 standard lot for $100,000 your margin on this trade is $1000 in your account, this is the money which you'll lose if your open trade position moves against you, the other amount $99,000 that's borrowed, the online broker will close out the open trades automatically using a Margin Call once your $1,000 has been taken by the market.
But this is if your online broker has set 0% Margin Requirements before stopping out your trades automatically using the Margin Call.
Examples 1: How to Calculate What is 20% Margin Requirements Level
For 20 % margin requirement before stopping out your trades automatically using what's referred to as Margin Call, then your transactions will be closed once your account balance gets to $200 - at $200 you'll get a margin call.
Examples 2: How to Calculate What is 50% Margin Requirements Level
For 50 % prerequisite of this level before closing your trade transactions automatically using what's referred to as margin call, then your trades will be stopped out once your trading account balance gets to $500 - at $500 you'll get a margin call.
Example 3: How to Calculate What is 100% Margin Requirements Level
If broker sets 100% margin requirement of this level before stopping out your open trades automatically using a Margin Call - at $1,000 you will get a margin call, then your trades will be stopped out once your trading account balance reaches $1,000: Meaning the trade transactions will stop out as soon as you as a trader executes a one standard contract on this trading account because even if you pay 1 pip spreads your trading account balance will get to $990 and the needed margin requirement % is 100% i.e. $1,000 dollars, therefore your open forex trade orders will immediately get liquidated using a Margin Call once your margin requirement falls below 100%.
Most brokers don't set 100% margin requirement, but there are those brokers that set 100% trading margin requirement level aren't suitable for you at all, even those forex brokers that set 50 % margin requirement level are still not suitable. Select those brokers set their margin requirement at 20% margin requirement level, in fact, those brokers that set at 20% Margin Requirement are the best because the likely hood they stop out your trade using a Margin Call is reduced as shown in the above example.
To Learn More about Leverage and Margin - Read the Topics Below:
Forex Leverage and Margin Discussed
