How is Stocks Margin Level Calculated?
We shall first explain the various stocks margin trading terms used in stocks platforms and then explain how stocks margin level is calculated using an example in MetaTrader 4 platform.
Stocks Margin, Margin Required, Equity, Used Stock Margin & Free margin
What's Margin Required? : It is amount of money your stocks broker requires from you to open a position. It is expressed in percentages.
What is Equity? : It is total amount of capital you have in your account.
What is Used Stock Margin? : amount of money in your account that has already been used up when buying a stocks lot, this contract is one that is displayed in open trades. As a trader you can not use this amount of money after opening a trade transaction because you have already used it and it is not available to you.
In other words, because your stocks broker has opened up a position for you using the capital you've borrowed, you must maintain this usable margin for your account as a security to allow you to continue using this stocks leverage he has given you.
What is Free Stock Margin? : amount in your account which you can use to open new trades. This is amount of money in your account which hasn't yet been stocks leveraged because you've not yet opened a transaction with this money - this money also is very important for you as a trader because it enables you to continue holding your open trades as will be explained below.
Example of How is Stocks Margin Level Calculated on MT4?
The stocks margin example in MetaTrader 4 stocks Platform below, the set stock leverage is 100:1, the stocks margin which is 1% is $2683.07, therefore the total amount controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest, with this set at 100:1, the trader is using 1 % of their account capital, this 1% is equal to $2683.07, if 1% is equal to $2683.07 then 100% is $268,307
MetaTrader 4 Stocks Leverage Margin Calculation - How is Stocks Margin Level Calculated?
Stocks Margin - $2683.07
Stocks Margin used to open trades in MetaTrader 4 examples above
This stocks Margin is 1% of the trade opened on the MT4 platform
To Know More about Stock Leverage and Margin - How Do You Read the Topics Below:
Stocks Leverage & Margin Discussed
