What is margin?
Margin can be thought of as a good faith deposit required to open and 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.
You can see a list of margin requirements here.
*Remember, leverage can be a double edge sword. Yes, it can assist a trader in opening a larger trade size than that of their account, but thus amplify gains and losses.
Why trade on margin?
Trading on Margin (Trading with Leverage) is a common attraction of the forex market. It allows you to open trades that are larger than the capital in your account.
In the example above, $1,000,000 have been purchased through a long USD/JPY position with a $50,000 account balance (20:1 Leverage).
Trading on margin can both positively and negatively affect your trading experience as both profits and losses can be dramatically amplified. Trading foreign exchange with any level of leverage may not be suitable for all investors.
What leverage does FXCM Markets offer?
FXCM Markets offers approximately 400:1 leverage (or 0.25%) on its Standard Account offering on major currency pairs. Learn More about FXCM Margin Requirements.
Leverage Tiers: Standard Accounts default to dealing desk execution on 400:1 leverage. Premium accounts default to No Dealing Desk execution on 100:1 leverage. Accounts with equity that surpasses 10,000 may be switched to 200:1 leverage. Accounts with equity that surpasses 20,000 may be switched to 100:1 leverage. FXCM may take steps to mitigate its risk arising from market making more effectively by, at our sole discretion and at any time and without previous consent, transferring your underlying account to our NDD execution offering.
Why does FXCM encourage lower leverage?
When you use excessive leverage, a few losing trades can quickly offset many winning trades. To clearly see how this can happen, consider the following example.
- Scenario: Trader A buys 50 lots of USD/JPY while Trader B buys 5 lots of USD/JPY.
- Questions: What happens to Trader A and Trader B account equity when the USD/JPY price falls 100 pips against them?
- Answer: Trader A loses 41.5% and Trader B loses 4.15% of their account equity.
Trader A Trader B Account Equity $10,000 $10,000 Notional Trade Size $500,000 (Buys 50, 10K lots) $50,000 (Buys 5, 10K lots) Leverage Used 50:1 (50 times) 5:1 (5 times) 100 Pip Loss in Dollars -$4,150 -$415 % Loss of Equity 41.5% 4.15% % of Equity Remaining 58.5% 95.85%
By using lower leverage, Trader B drastically reduces the dollar drawdown of a 100 pip loss.
Where can I view FXCM's up-to-date margin requirements?
You can view up-to-date margin requirements listed by currency pair in the MMR column of the "Simple Dealing Rates" window within the platform. Margin requirements are subject to change without notice based on price fluctuations.
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 with any level of leverage may not be suitable for all investors.