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