What is the Formula Used to Calculate Margin?

The following forex trading terms are used in the formula of how to calculate forex margin.

Forex Margin, Margin Required, Equity, Used Forex Margin and Free Margin

What's 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 total amount of capital you have in your forex account.

What's Used Margin? : amount of money in your forex account that 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 forex trade because you have already used it to open another trade and it is not available to you.

In other words, because your forex 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 forex account that you can use to open new trades. This is amount of money in your account which hasn't yet been leveraged because you have not yet opened a transaction with this money - this is also very important for you as a trader because it enables you to continue holding your open forex trades as will be described below.

Example of Formula for How to Calculate Forex Margin on MT4

The forex trading margin examples on MetaTrader 4 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 and borrowed the rest, with this set at 100:1, the trader is using 1% of their capital, this 1% is equal to $2683.07, if 1% is equal to $2683.07 then 100% is $268,307

What is the Formula Used to Calculate Margin? - Calculating Forex Margin Formula Explained