How does floating leverage work?

How does floating leverage work?

For traders’ safety and comfort, we use floating leverage on our Optimum account. This means that the higher the volume of your order, the lower the leverage becomes. Floating leverage only applies to Forex and Metals pairs and is distributed across your order volume as detailed in the table below. 

Trade volumeLeverage
USD 0 - 50,000 1:1000 (0.1%)
USD 50,001-100,0001:500 (0.2%)
USD 100,001-1,000,000  1:200 (0.5%)
USD 1,000,001 1:100 (1%)

 

When you trade with FXChoice, you trade in lots not a monetary amount. So, some calculations are necessary to convert your lot amount into a dollar equivalent. As you can see, the first USD 50,000 volume of your trade incurs a 1:1000 leverage, the second USD 50,000 incurs 1:500 leverage, and then the leverage becomes progressively lower as your volume rises, up to and over USD 1,000,000.  
 

Please read the examples below to understand how to convert your trade volume into a dollar equivalent and how different scenarios affect the way floating leverage works. 

Examples 

Exchange rate for calculations as of 15.11.2022, 13:39:06 

  

 

Example 1 

Let’s assume there are no existing open market orders, and you open a ‘BUY’ trade on the EURUSD pair with a trading volume of 0.48 lots. The margin currency is EUR, so the trading volume will be converted to dollars: 

Contract Size EURUSD = EUR 100,000 

Position value, USD = 100,000 * Ask * Lots = 100,000 * 1.04159 * 0.48 = USD 49,996.32 

  

Trade volumeLeverage
USD 0 - 50,000 1:1000 (0.1%)

As USD 49,996.32 is less than $50,000, the order margin will be calculated with a 1:1000 leverage. 

Margin = USD 49,996.32 / 1,000 = USD 49.99  

  

Example 2 

Let’s assume there are no existing open market orders, and you open a ‘BUY’ trade on the EURUSD pair with a 0.49 lot volume. 

As the margin currency is EUR, the trading volume will be converted to dollars: 

Contract Size EURUSD = 100,000 EUR 

Position value, USD = 100,000 * Ask * Lots = 100,000 * 1.04159 * 0.49 = USD 51,037.91 

 

Trade VolumeLeverage
USD 0 - 50,000 1:1000 (0.1%)
USD 50,001-100,0001:500 (0.2%)

  

The volume of the order is USD 51,037.91 and falls into the second interval. So, the margin will be calculated for every part of the order volume separately. For the first part of the order volume, equal to USD 50,000, the margin will be calculated with a 1:1000 leverage. For the second part of the order volume, equal to USD 1,037.91, the margin will be calculated with a 1:500 leverage. 

Margin: 

1.   USD 51,037.91 = USD 50,000 + USD 1,037.91  

1a.   USD 50,000 / 1000 = USD 50   

1b.   USD 1,037.91 / 500 = USD 2.07 

2.   Total margin = 50 + 2.07 = USD 2.07 

 

Example 3 

Let us assume there are no existing open market orders, and you open a ‘BUY’ trade on the USDJPY pair with a volume of 0.3 lots. 

As the margin currency is already in USD, you don’t need to convert to dollars. 

Contract Size USDJPY = USD 100,000

Position value, USD = 100,000 * Lots = 100,000 * 0.3 = USD 30,000 

 

Trade volumeLeverage
USD 0 - 50,000 1:1000 (0.1%)

  

As USD 30,000 is less than USD 50,000, the trade’s margin will be calculated with a 1:1000 leverage. 

Margin USDJPY = USD 30,000 / 1,000 = USD 30 

  

And then another ‘BUY’ order is opened on the XAUUSD (Gold) pair with a volume of 0.2 lots. 

Contract Size XAUUSD = 100 XAU 

Position value, USD = 100 * 0.2 * Ask = 100 * 0.2 * 1,775.31 = USD 35,506.20 

Since the trading volume for the USDJPY trade is equal to USD 30,000, the total trading volume of USDJPY plus the XAUUSD trade will be 30,000 + 35,506.02 = USD 65,506.20 

 

Trade volumeLeverage
USD 0 - 50,000 1:1000 (0.1%)
USD 50,001-100,000    1:500 (0.2%)

As the volume of all open orders is USD 65,506.02, it falls into the second interval. So the margin will be calculated for the XAUUSD order volume separately. In the first part of the gold trade, equal to USD 20,000, the margin will be calculated with a 1:1000 leverage, and the remaining USD 15,506.20 will be calculated with a 1:500 leverage. 

Margin: 

1.       USD 35,506.2 = USD 20,000 + USD 15,506.20 

1a.   USD 20,000 / 1000 = USD 20  

1b.   USD 15,506.20 / 500 = USD 31.01 

  

2.       margin USDJPY = USD 30 

margin XAUUSD = USD 20 + USD 31.01= USD 51.01 

  

3.       Total margin = Margin USDJPY + Margin XAUUSD = USD 30 + USD 51.01 =  USD 81.01 

  

Example 4 

Let us assume there are no existing open market orders, and you open a trade on the USDJPY pair with a trading volume of 1.6 lots. 

As the margin currency is already in USD, you don’t need to convert to dollars. 

Contract Size USDJPY = USD 100,000 

Position value, USD = 100,000 * Lots = 100,000 * 1.6 = USD 160,000 

Trade volumeLeverage
USD 0 - 50,000 1:1000 (0.1%) 
USD 50,001-100,000 1:500 (0.2%) 
USD 100,001-1,000,000 1:200 (0.5%) 

The total volume of the trade is USD 160,000 and falls into the third interval. So the margin will be calculated for every part of the trading volume separately.  

Margin USD 160,000 = 50,000 + 50,000 + 60,000 

For the first part of the trading volume, equal to USD 50,000, the margin will be calculated with a 1:000 leverage. For the second part of the trading volume, also equal to USD 50,000, the margin will be calculated with a leverage of 1:500. And for the third part of the trading volume, equal to USD 60,000, the margin will be calculated with a 1:200 leverage. 

  

Margin: 

1.       USD 160,000 = 50,000 + 50,000 + 60,000 

  

1a.   USD 50,000 / 1,000 = USD 50 

1b.   USD 50,000 / 500 = USD 100 

1c.   USD 60,000 / 200 = USD 300 

  

2.       Total Margin USDJPY   = USD 50 + USD 100 + USD 300 = USD 450 

  

Example 5 

On the client account there is an open trade on the USDJPY pair of 1.6 lots (as in Example 4) and the trade is partially closed by 0.7 lots, leaving 0.9 lots open: 

 
 

Contract Size USDJPY = USD 100,000 

Position value, USD = 100,000 * Lots = 100,000 * 0.9 = USD 90,000 

Trade volumeLeverage
USD 0 - 50,000 1:1000 (0.1%) 
USD 50,001-100,0001:500 (0.2%) 

The volume of the order is USD 90,000, so it falls into the second interval. So, the margin will be calculated for every part of the trading volume separately.  

Margin: 

1.       USD 90,000 = 50,000 + 40,000 

1a.   50,000 / 1,000 = USD 50 

1b.   40,000 / 500 = USD 80 

2.       Total margin USDJPY = USD 50 + USD 80 = USD 130 

  

Example 6 

On the client’s account there is an open trade on the EURUSD pair, and another trade is opened on the crypto pair BTCUSD. 

Since floating leverage doesn’t apply to Crypto, the margin for BTCUSD will be calculated at 3% from the cost of the BTCUSD position in accordance with the ‘Current Margin Requirements’ table above. 

 
 

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