How to Calculate Margin in Forex - How to Calculate Forex Margin Requirement in Forex
Now if Your Forex Trading Leverage is 100:1
When forex trading if you have $1,000 & use option 100:1 and buy 1 standard lot for $100,000 your margin on this forex transaction is the $1000 dollars in your forex account, this margin is the money that you will lose if your open trade goes against you the other $99,000 that is borrowed, they will close the open trade transactions automatically once your $1,000 has been taken by the market.
But this is if your forex broker has set 0% Margin Requirement before closing your trades automatically.
For 20% requirement before closing your trades automatically, then your forex transactions will be closed once your balance gets to $200
For 50% requirement of this level before closing your trades automatically, then your forex transactions will be closed once your balance gets to $500
If they set 100% requirement of this level before closing your open trade positions automatically, then your forex trade will be closed once your balance gets to $1,000: Meaning the trade will close out as soon as you execute it because even if you pay 1 pip spread your account balance will get to $990 & the needed percentage is 100% i.e. 1,000 dollars, therefore your orders will immediately get closed.
Most forex brokers do not set 100% requirement, but there are those who set 100% or 50% aren't suitable for you at all, choose those set 20% margin requirements, in fact, those brokers who set it at 20% are some of the best because the likely hood they close-out your open forex trade is reduced as shown in example below.
To know about this margin level which is calculated by your MT4 platform automatically - the MetaTrader 4 Platform will display this as "Margin Requirement", This will be displayed as a percentage the higher the margin percentage the less likely your trades are to get closed.
For Examples if - for a broker requiring 20% margin requirement
Using 100:1 leverage
If leverage is 100:1 & you transact 1 Mini Lot, equals to $10,000
$10,000 dollars(mini lot) divide by 100:1, your used capital is $100
Calculation:
= Capital Used * Percentage(100)
= $1,000/$100 * Percentage(100)
Margin Requirement = 1,000 %
Investor has 980% above the forex margin required amount
Using 10:1
If leverage is 10:1 & you transact 1 Mini Lot, equals to $10,000
$10,000 dollars(mini lot) divide by 10:1, your used trading capital is $1000
Calculation:
= Capital Used * Percentage(100)
= $1,000/$1000 * Percent(100)
Margin Requirement = 100 %
Investor has 80% above the forex margin required amount
The margin trading example 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 and borrowed the rest, with this set at 100:1, the trader is using 1 % of their capital, this 1% is equivalent to $2683.07, if 1% is equal to $2683.07 then 100% is $268,307
How to Calculate Margin in Forex - How to Calculate Forex Margin Requirement in Forex
