How can I calculate the margin?

Modified on Thu, 19 Jun at 2:24 PM

Margin is the amount of money that a trader needs to put forward in order to open a trade. It is a part of your equity, deferred as collateral, in order to open a position and maintain it.

This ratio is calculated using the following formula:

Margin = Volume * Contract size / Leverage

You may also find the minimum margin in the Contract Specifications section of the instrument.

Let's familiarize ourselves with some common terms that would be encountered while calculating margin requirements.

Volume:

The volume is taken in lots where:

1.00 refers to 1 standard lot or 100,000 units of the base currency.

0.10 refers to 10,000 units of the base currency.

0.01 refers to 1,000 units of the base currency.

Contract size — Equivalent to the traded amount on the Forex or CFD market, which is calculated as a standard lot size multiplied by the lot amount. The Forex standard lot size represents 100,000 units of the base currency. For CFDs and other instruments see details in the Contract Specifications page.

Leverage — The ratio of the position`s notional value to the amount of margin required for opening a position (e.g., leverage 1:20 means that a EUR 100,000 contract requires as low as 5,000 EUR margin).

However, when the client wants to open multiple trading instruments then margin requirement calculation can be done as follows:

Margin requirement = Total Notional Value / Leverage

If the account currency differs from the currency of the instrument, then we need to convert the currency. If the margin currency is in the first place in the currency pair and the account currency is on the second, then we need to multiply the margin by the exchange rate. If the margin currency is in second place in the currency pair, then we need to divide the margin by the exchange rate. For example, if we have established that the margin is 100 EUR and the account currency is USD, we multiply 100 EUR by 1.05484. On the contrary, if the margin is 100 USD, then we would calculate as 100 USD / 1.05484

*Please note that the currency rate is used as an example only, you should check the currency rate in your Meta Trader platform

Total notional value: Volume * Contract Size

The leverage varies depending on the notional value of the instruments traded.

Please find some examples of margin calculation

*Please note that the currency rate is used as an example only, you should check the currency rate in your Meta Trader platform

For example, if a position is opened as: Buy 10 lots EURUSD at 1.05484.

The notional position value in the accounts currency (USD) is 10 lots * 100,000 * 1.05484 = 1,054,840 USD, which is less than the first tier of 7,500,000 USD. Therefore, a leverage of 1:500 is applied to this position and the margin requirements are calculated as 1,054,840 / 500 = 2,109.68 USD

Next, if a position is opened as: Buy 100 lots on Germany40 at 20,258.600 while the EURUSD rate in MetaTrader is 1.05484. Germany40 is quoted in EUR, so the notional position value in the accounts currency (USD) is 100 lots * 20,258.600 * 1.05484 =2,136,958.16 USD.

The above value is more than the first tier of 500,000 USD but less than the second tier of 3,500,000 USD. Therefore, a leverage of 1:500 is applied to the first 500,000 USD of this position and a leverage of 1:200 is applied to the remainder. So, the margin requirements are calculated as 500,000 / 500 + 1,636,958.16 / 200 = 9,184.79 USD.

If you want to look into more examples, please kindly visit this page Margin Calculations on our website.

If you have any questions, please do not hesitate to contact us.