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. 

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 $50,000 volume of your trade incurs a 1:1000 leverage, the second $50,000 incurs 1:500 leverage, and then the leverage becomes progressively lower as your volume rises, up to and over $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 = $49,996.32 

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

Margin = $49,996.32 / 1,000 = $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 = $51,037.91 

The volume of the order is $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 $50,000, the margin will be calculated with a 1:1000 leverage. For the second part of the order volume, equal to $1,037.91, the margin will be calculated with a 1:500 leverage. 

Margin: 

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

1a.   50,000USD / 1000 = $50   

1b.   1,037.91USD / 500 = $2.07 

2.   Total margin = 50 + 2.07 = $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 = 100,000 USD 

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

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

Margin USDJPY = $30,000 / 1,000 = $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 = $35,506.20 

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

As the volume of all open orders is $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 $20,000, the margin will be calculated with a 1:1000 leverage, and the remaining $15,506.20 will be calculated with a 1:500 leverage. 

Margin: 

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

1a.   $20,000 / 1000 = $20  

1b.   $15,506.20 / 500 = $31.01 

2.       margin USDJPY = $30 

margin XAUUSD = $20 + $31.01= $51.01 

3.       Total margin = Margin USDJPY + Margin XAUUSD = $30 + $51.01 =  $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 = $160,000 

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

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

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

Margin: 

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

1a.   $50,000 / 1,000 = $50 

1b.   $50,000 / 500 = $100 

1c.   $60,000 / 200 = $300 

2.       Total Margin USDJPY   = $50 + $100 + $300 = $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 = $90,000 

The volume of the order is $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.       $90,000 = 50,000 + 40,000 

1a.   50,000 / 1,000 = $50 

1b.   40,000 / 500 = $80 

2.       Total margin USDJPY = $50 + $80 = $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.