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Margin Calculator

As the world's largest trading marketplace, the forex offers traders and investors countless avenues by which to pursue almost any financial goal. From the execution of carry trade strategies to intraday scalping practices, participants are privy to unparalleled opportunity. The ability to trade on margin is a primary reason why.

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Margin is a good-faith deposit made by a trader to a brokerage service. It is a critical element of forex trading and gives participants the ability to open positions in excess of capital-on-hand. Margin trading promotes participation, market efficiency and liquidity by offering traders the chance to leverage small amounts of risk capital into larger profits. While leverage can amplify clients' profits, it is important to note that it can also dramatically amplify clients' losses.

While the concept of margin is straight forward, staying on top of associated capital requirements can be a challenge. Margin varies on a per trade basis and is dependent upon currency pair, trade size and evolving market conditions. In order to avoid premature position liquidations or surprise deposit requests, active forex traders frequently make use of a margin calculator to quantify financial obligations.

Using The Margin Calculator

Successful forex trading involves many skills, both theoretical and pragmatic. At the very top of the list is money management. Many traders fall short in this department for any number of reasons, but the most common is misuse of financial leverage.

In order to apply leverage wisely, it is always a good idea to stay abreast of used margin. The margin calculator provides traders with a simple way to accomplish this task. All that is needed is a few basic inputs:

  • Account Currency: The denomination of the trading account is required for conversion purposes.
  • Currency Pair: Majors, minors, crosses and exotics are available for selection.
  • Conversion Price: In order to deem the value of an open position, it's necessary to price the targeted currency pair.
  • Margin Ratio: Margin ratio is a comparison of the segregated account balance to the value of an open position. As this ratio grows, required margin decreases. FXCM offers 30:1 leverage for major currency pairs and 20:1 leverage for minor currency pairs for Retail clients and up to 400:1 for Professional clients.
  • Trade Size: The single most important factor impacting applied leverage is trade size. From micro to standard lots, the greater the trade size, the greater the margin used.

Working with the margin calculator is routine courtesy of the intuitive user interface. For instance, assume that an account denominated in British pounds is holding one standard lot of the EUR/GBP (0.8786) at 30:1 leverage. Used margin is calculated as follows:

Input Value
Account Currency GBP
Currency Pair EUR/GBP
Conversion Price (EUR/GBP) 0.8786
Margin Ratio 30:1
Trade Size 100,000
Margin Used (GBP) £2928.67

Perhaps the best part of using the margin calculator is its advanced functionality. No matter the forex pair or size, it quickly and easily defines the capital needed for facilitating the trade.

Disclosure
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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.

Hypothetical/Simulated Performance: These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Simulated or hypothetical trading programs are generally designed with the benefit of hindsight, do not involve financial risk, and possess other factors which can adversely affect actual trading results.

These materials constitute marketing communication and do not take into consideration your personal circumstances, investment experience or current financial situation. The content is provided as general market commentary and should not be construed as containing any type of investment advice, investment recommendation and/or a solicitation for any investment transactions. This market communication does not imply or impose an obligation on you to perform an investment transaction and/or purchase investment products or services. These materials have not been prepared in accordance with legal requirements designed to promote the independence of investment research and are not subject to any prohibition on dealing ahead of the dissemination of investment research.

FXCM, and any of its Affiliates, shall not in any way be liable to you for any inaccuracies, errors or omissions, regardless of cause, in the content of these materials, or for any damages (whether direct or indirect) which may arise from the use of such materials, services and their content. Consequently, any person acting on them does so entirely at their own risk. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.