What is Leverage & Margin in Forex Trading?

FX TRADING ON LEVERAGE

You can trade Forex and CFDs on leverage. This can allow you to take advantage of even the smallest moves in the market. When you trade with FXCM, your trades are executed using borrowed money. For example, 30:1 leverage on a major forex pair like AUD/USD allows you to trade with $10,000 in the market by setting aside only around $334 as a security deposit. Please keep in mind that leverage is a double-edged sword. While it can greatly amplify your profits, it can also dramatically amplify your losses.

Forex Leverage Limits

FXCM offers different leverage for different tradeable instruments.

  • 30:1 for major currency pairs
  • 20:1 for minor currency pairs, gold and major stock market indices
  • 10:1 for commodities other than gold and minor stock market indices
  • 2:1 for cryptocurrencies
  • 5:1 for shares or other assets

What is Margin?

Margin can be thought of as a good faith deposit required to maintain open positions. This is not a fee or a transaction cost, it is simply a portion of your account equity set aside and allocated as a margin deposit. The amount of margin that you are required to put up for each currency pair varies by the leverage profiles listed above.

Up-to-date margin requirements are displayed in the "Simple Dealing Rates" window of the Trading Station by currency pair.

Forex Leverage - Simple Dealing Rates

Do Forex and CFDs Margin requirements change?

Margin requirements can periodically change to account for changes in market volatility and currency exchange rates. For example, the margin requirement (MMR) for a specific currency pair is calculated as a percentage of the notional value of such pair. As the exchange rates for any specific currency pair fluctuate up or down, the margin requirement for that pair must be adjusted. As an example, if the Euro strengthens against the US dollar, more margin will be required to hold a EUR/USD position in a US dollar denominated account. FXCM does not anticipate more than one update a month, however extreme market movements or event risk may necessitate unscheduled intra-month updates.

View upcoming margin requirements.

Disclosure

Leverage: Leverage is a double-edged sword and can dramatically amplify your profits. It can also just as dramatically amplify your losses. Trading foreign exchange/CFDs with any level of leverage may not be suitable for all investors.