How to Calculate Margin - What is Margin?
Margin is the amount of money required by your forex broker so that to allow you to continue trading with borrowed amount in your forex account.
In other words the question what's margin in Forex? can be described as the money required to cover open currency trades & is expressed in percentage. For 100:1, the amount you will control is 100,000 dollars if your forex account capital is $1,000.
Now can you compare a investor investing $1,000 with another one that is investing $100,000? Obviously Not. This is how it works: it takes you from that retail investor investing $1,000 to that investing $100,000. Where does this extra cash come from? - You borrow it from your forex broker in what is simply referred to as Leverage. This money that you borrow, you borrow it against the $1,000 dollar of your own that you deposit with your broker when you open a forex account. If you were to explain what this means - then it is the ability to control a big amount of money using very little of your own money and borrowing the rest. Otherwise, if you were trade Forex without this leverage it would not be as profitable as it is, in fact you can still choose not to use leverage, using the 1:1 leverage option but you would not make money it would take too long to make any profit in forex trading.
Examples of how to calculate Margin:
Forex Margin required in this case is 1,000 dollars (your money) if it's expressed as a percentage of 100,000 dollars which you control it is:
If leverage = 100:1
1,000 / 100,000 * 100= 1%
Forex Margin required = 1%
(1/100 *100= 1%)
How to Calculate Margin - What is Margin?
