Here is the basic formula used to calculate margin: Margin=Trade Volume/Account Leverage. Please note that Trade Volume is calculated depending on the currency of your account. While calculating a trade volume, you need to take the Base currency into account. The Base Currency is the first in a currency pair.
EXAMPLE 1. Let’s assume that you have a trading account in USD with a leverage of 1:50, and you are going to open a 0.2 lot trade on USDCHF currency pair. The required margin will be: Margin = Trade Volume/Account leverage=20 000 (0.2 lot)/50(our leverage)=400USD.
EXAMPLE 2. Now let’s assume that you have a trading account in USD with a leverage of 1:200 and you are going to buy 0.5 lot of the EURUSD currency pair. Given that the current EURUSD exchange rate is 1.3200, the required margin will be: Margin=Trading Volume/Account Leverage=50 000*1.32/200=330USD. In this example we have bought 0.5 lots of EUR, but our account is in USD, that is why we have converted the amount of our trade back to USD – according to the current exchange rate.
Risk warning: Forex, spread bets and CFDs are leveraged products. They may not be suitable for you as they carry a high degree of risk to your capital and you can lose more than your initial investment. You should ensure you understand all of the risks.
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