Trade Forex Trading

What is Margin Account? - How to Calculate Margin

What is Margin Account? - What is Free Margin Level? - What is Used Margin Level?

The meaning of Leverage is having the ability to control a big amount of money using very little of your own money & borrowing the rest - this is what makes the market to attract a lot traders.

We shall explain leverage first and then explain margin in this learning how to calculate leverage and margin tutorial.

Example:

We shall use this example illustration to illustrate what trading leverage is? If your broker gives you leverage of 100:1 (this is the best option to select as a maximum for any account)

This means you borrow $100 for each one dollar you have on your account.

In other terms your broker gives you $100 for each $1 in your account. This is what is known as leverage.

This means if you open an account with $1,000 & your leverage ratio is 100:1, then you'll get $100 for every $1 dollars you which you have, the total amount which you'll control is:

If for dollar the online broker gives you 100

Then if you have 1,000 you will get a total of:

$1,000 * 100 = $100,000 dollars

Now you control $100,000 of Investment

Most new traders ask what leverage is best leverage for $1,000, or $2,000 dollars, or $5,000 trading account? - Best leverage option to select when opening a real account is 100:1 & not 400:1.

What's Margin?

This is the amount of money required by your broker so that to allow you the trader to continue trading with the borrowed amount.

In other words the question what's margin in FX? can be elaborated as the money required to cover open trades & is denoted/expressed in percentage. For 100:1, the amount you will control is $100,000 dollars as presented in the above exemplifications.

Now can you compare someone investing $1,000 with another one investing $100,000? Obviously Not. This is how it works, it takes you from the guy investing $1,000 to the one investing $100,000 dollars. Where does this extra money come from? You borrow from your broker in what is simply referred to as Leverage. This funds that you borrow, you as a trader borrow it against the $1,000 of your own funds that you deposit with your online broker. If you were to explain what this leverage 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 without this leverage it wouldn't be as profitable as it is, in fact you as a trader can still select not to use leverage, using the 1:1 option but you would not make money it'd take too long to make any profit.

Example of how to calculate leverage & margin:

Margin required in this case is $1,000 (your money) if it is denoted/expressed as a percent of $100,000 which you now control it is:

If leverage option = 100:1

1,000 / 100,000 * 100= 1%

Margin required = 1%

(1/100 *100= 1%)

"TradeForex - Simplify please because I am a Beginner'

(Simplify - your funds is $1,000 after leverage you control $100,000 - $1,000 is what percent of $100,000 - it's 1%) that's your trading account margin requirement for your account.

What is Margin Trading Account? - What is Margin Trading? - How to Calculate Margin - Margin Calculation - What is Margin Account - What is Free Margin Level in Forex? - What is Used Margin Level in Forex? - What is Margin in Forex Trading?

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