Forex broker inc margin calculator forex

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Margin is an insurance that you must maintain on your account for opening positions. The Margin Calculator works out exactly how much margin do you need in order to open a particular position. Since forex trade carries a high level of risk, you must determine if you need to reduce the lot size trade size or you can afford to trade more.

In fact, the forex margin determines if you can afford to enter the trade. In fact, that is why it is so important for a trader. How to use the calculator To use Forex Margin calculator, please follow the simple steps: Select currency pair you trade with; Select your base currency or account currency ; Enter the present exchange rate; Select the leverage provided to you by your broker; Enter the trade size the amount you would like to purchase ; Hit calculate.

After hitting calculate you will get an amount of leverage or the amount of money that is needed to enter the trade. What is Margin in Forex? Now before we move ahead with explaining how margin impacts forex trading, there are a few related terms that we need to take a look at. It can be expressed as gross profit margin as well. Margin account: The account you have to open in order to start trading using margin funding.

Leverage: The term used for borrowed money to invest in a currency. Lot: The unit in which forex is commonly traded. It consists of a standard lot, mini lot, micro lot and nano lot. Maintenance Margin: It ensures that the trader has enough capital to keep their positions open.

It should also cover any existing losses. How to calculate margin in FX trading? When trading currencies, you may be trading a currency pair that is entirely different from the currency used in your account. The margin requirement for this kind of trades have to be calculated to proceed and the difference in currencies makes this job difficult. Looking at the following example will help make things clearer.

The margin calculator will calculate your margin requirement based solely on the USD or your main account currency. Thus margin for this trade is 1. Relationship between margin and leverage Leverage, which is also known as margin ratio, can differ depending on the broker you have chosen. A typical margin requirement provided by brokers is 30x. Now if there is a margin of 20x, the increased ratio of leverage reduces profit potential and purchasing power.

You may be attracted to lower margin requirements as it allows you to take the same position by investing a lot less. But this goes both ways, as the risk will also be amplified with a lower margin. If you fail to consider these implications, you could end up incurring losses before you even realize them. High leverage on the other hand will ensure that your margin call won't come quickly. What is a Margin Call? This usually happens if your account loses the usable margin accepted by your broker, due to incurring large losses.

This leaves less room to incur losses for the trader. Brokers have the margin call system in place as it helps to reduce their risk substantially. Some of the reasons why margin calls can occur include: trading without stops when the price moves in the opposite direction, underfunded account, over-leveraging your account and holding on to a losing trade for too long.

How does a margin call work? When triggered, the margin call liquidates or closes the trades of the trader. To understand this clearly, let's take the help of an example. Your margin percentage is 2 per cent. Now assume that this is the sole position open. You may be tricked into thinking that your account is in good condition at this point. However, more leverage means your account is less capable of handling large movement against the trader.

Tips to Avoid Margin Call Leverages has always been a danger as well as a gift. The bigger or greater leverage a trader uses, the less available margin usable the trader will have to incur losses.