CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Leverage and Margin
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 GBP/USD allows you to trade with €10,000 in the market by setting aside only around €334 as a security deposit.
FXCM EU offers different leverage for different tradeable instruments.
30:1 leverage restriction for major currency pairs
20:1 for non-major currency pairs, gold and major indices
10:1 for commodities other than gold and non-major equity indices
5:1 for individual equities and other reference values
2:1 for cryptocurrencies
To view up to date Margin Requirement please click here.
Further to the above leverage requirements, FXCM EU has established a negative balance protection policy which in the event that a negative balance occurs in the clients' trading account due to stop out and/ or extremely volatile market conditions, then a relevant adjustment to cover the full negative amount will be made. This means that retail clients will never lose more than the total funds invested in their trading account. Professional clients are not entitled to negative balance protection. In addition, considering the level of risk and complex nature of trading CFDs, FXCM EU does not offer any incentives to encourage retail clients to trade.
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. Margin requirements (per 1k lot for FX and 1 Contract for CFDs) are determined by taking a percentage of the notional trade size plus a small cushion. The cushion is added to help alleviate daily/weekly fluctuations.
FXCM accounts utilize a Tiered Margin system which consists of an Entry / Maintenance margin and a Liquidation margin.
Entry / Maintenance Margin – The initial good faith deposit or collateral set aside to open and then maintain a position. On the Trading Station platform the exact amount of margin required to open a position can be viewed in the "MMR" column under the "Simple Dealing Rates" tab or in the "Used Maint Mr" column under the "Accounts" tab - Explore in Accounts Tab in Trading Station Web.
Liquidation Margin (Minimum Required Margin) - Generally 50% of the Entry Margin, If your account equity falls below this level, all positions are closed.
FXCM's Tiered Margin Watcher is designed to notify you in advance of margin calls, which can give you more time to take action to potentially avoid them. Watch the video to find out more, or check out our Margin Watcher FAQs
Do 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.
The Trading Station tiered margin system consists of two components:
Initial Entry/Maintenance Margin – The initial good faith deposit or collateral set aside to open and then maintain a position. The exact amount of margin required to open a position can be viewed in the "MMR" column under the "Simple Dealing Rates" tab on the Trading Station platform or in the "Used Maint Mr" column under the "Accounts" on the Trading Station platform.
Liquidation Margin (Minimum Required Margin) – The minimum amount of equity that must be in the account in order to continue holding the current open positions on the account. This is set at 50% of the value of the Maintenance Margin. If the account equity falls below this level, all positions will be automatically closed. The exact amount of margin required before automatic liquidation will occur can be found in the "Used Mr" column under the "Accounts" tab on the Trading Station platform.
MetaTrader 4 (MT4) Tiered Margin
Similar to Trading Station II accounts, MetaTrader 4 (MT4) accounts are defaulted to a tiered margin system. MT4 accounts do not use the Smart Margin system, but use a different version of FXCM's tiered margin and margin call procedures. The MT4 Tiered Margin system is designed to allow clients more time in which to manage their positions before the automatic liquidation of those positions occurs. Clients are able to see real-time updates of their margin status on the MT4 platform.
The MT4 platform does not allow FXCM to include commissions in pre-trade margin calculations on client's pending orders. This means that if you place a trade with a small amount of available usable margin under the MT4 account, there is a risk that the execution of the orders could trigger immediate margin call right after the execution as the commission charges can result in insufficient margin to maintain your open positions. You should therefore ensure that you have reserved sufficient buffer usable margin before opening new trades.
The MT4 Tiered Margin system consists of two components:
Entry / Maintenance Margin – The initial good faith deposit or collateral set aside to open and then maintain a position. The exact amount of margin required to open a position can be viewed in the "MMR" column under the "Simple Dealing Rates" tab on the Trading Station platform prior to execution or by viewing the label "Margin" under the "Trade" tab in the MT4 platform.
Liquidation Margin (Minimum Required Margin) – The minimum amount of equity that must be in the account in order to continue holding the current open positions on the account. This is set at 50% of the value of the Maintenance Margin and automatic liquidation will trigger when the "Margin Level" label under the "Trade" tab in the MT4 platform reads "50%" or below.
Equity is your account balance plus the floating profit/loss of your open positions.
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 appropriate for all investors.
Trading Accounts: Price arbitrage strategies are prohibited and FXCM determines, at its sole discretion, what encompasses a price arbitrage strategy. Trading accounts offer spreads plus mark-up pricing. Spreads are variable and are subject to delay. Leverage for FX and CFDS varies per instrument. Major currency pairs default to 30:1, non-major currency pairs, gold and major indices default to 20:1, commodities other than gold and non-major equity indices default to 10:1, 5:1 for individual equities and other reference values and cryptocurrencies default to 2:1.