Understanding Margin
Margin is the amount of money required in your trading account to open and maintain a leveraged position. It acts as a good-faith deposit, not a fee. The required margin depends on the trade size, the currency pair being traded, and the leverage applied to your account. Proper margin management is essential for risk control.
Margin Calculation Formula
The required margin is calculated using the following formula:
- Required Margin = (Trade Size x Contract Size x Market Price) / Leverage
- For a standard lot (1.0), the contract size is 100,000 units of the base currency.
- Higher leverage reduces the margin requirement but increases risk exposure.
For example, trading 1 lot of EUR/USD at 1.0850 with 1:100 leverage requires: (1 x 100,000 x 1.0850) / 100 = $1,085.00 margin.
