How to Calculate Margin
Margin is the amount of money required by your stocks broker so as to allow you to continue trading with the borrowed amount in your stocks trading account.
In other words the question what is margin in Stocks? can be described as money required to cover open stock trades & is expressed in percentage. For 100:1, the amount you will control is 100,000 dollars if your stocks 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 originate from? You borrow from your stocks broker in what is simply known as Stock Leverage. This money that you borrow, you borrow it against the $1,000 dollar of your own that you deposit with your stocks broker when you open a stocks 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 Stocks without this stocks leverage it would not be as profitable as it is, in fact you can still select not to use stocks leverage, using the 1:1 stocks leverage option but you would not make money it would take too long to make any profit in stocks.
Example of how to calculate Margin:
Stocks 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%
Stock Margin required = 1%
(1/100 *100= 1%)
How to Calculate Margin - What's Margin?
