How is Forex Margin Level Calculated?
We shall first explain the various forex margin trading terms used in forex trading platforms & then explain how forex margin level is calculated using and example on MetaTrader 4.
Forex Margin, Margin Required, Equity, Used Margin and Free margin
What is Margin Required? : It is amount of money your Forex broker requires from you to open a position. It is expressed in percents.
What is Equity? : It is the total amount of capital you have in your account.
What's Used Margin? : amount of money in your account which has already been used up when buying a currency contract, this contract is one that is displayed in open positions. As a trader you can't use this amount of money after opening a trade order transaction because you have already used it and it is not available to you.
In other words, because your broker has opened up a position for you using capital you have borrowed, you must maintain this usable margin for your trading account as a security to allow you to continue using this leverage he has given you.
What is Free Margin? : amount in your account that you can use to open new trade positions. This is amount of money in your 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 as a investor because it enables you to continue holding your open trades as will be explained below.
Example of How is Forex Margin Level Calculated on MT4?
The forex trading margin examples on MT4 forex Platform below, the set leverage is 100:1, the forex margin which is 1% is $2683.07, therefore the total amount controlled by forex 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, the trader is using 1% of their trading capital, this 1% is equivalent to $2683.07, if 1% is equal to $2683.07 then 100% is $268,307
MetaTrader 4 Forex Leverage Margin Calculator - How is Forex Margin Level Calculated?
Forex Margin - $2683.07
Forex Margin used to open trades in MetaTrader 4 examples above
This forex Margin is 1% of the trade opened on the MetaTrader 4 platform
To Learn More about Forex Leverage & Margin - Read the Topics Below:
Forex Leverage & Margin Explained
