Margin & Leverage FAQs
- What is margin?
- What is leverage?
- What are the margin requirements at FOREX.com?
- What are step margin levels?
- Can my account go negative?
- How is margin handled with hedging?
What is margin?
Margin is equity from your account set aside by FOREX.com to maintain a position when you’re trading on leverage.
What is leverage?
Leverage is the ability to control a large position with a small amount of capital. It is usually denoted by a ratio. For example, if your account has a leverage of 20:1, that means you can trade a position of $50,000 with only $2,500.
Please note that increased leverage increases risk.
What are the margin requirements at FOREX.com?
Minimum Margin Requirement (MMR), also called a Security Deposit, is the amount of available cash you need in your account to trade one of the products we offer. The base MMR is set for each product and may increase based on the size of the position you trade. The specific MMR for each product we offer is available on our website at the following URL (Margin requirements) and is also included on each product’s Market 360 section on the FOREX.com platform. Initial MMR is calculated when you first open a trade and Ongoing MMR is recalculated at least once per day thereafter. MT4 and FOREX.com use the same process to calculate Initial MMR but use different processes for calculating Ongoing MMR which is explained further below. We also provide additional tools to help customers calculate and monitor MMR:
- Margin Calculator: Platform Tool can be used to manually Calculate MMR at any time.
- Monitor each position’s margin requirement separately.
- Margin Indicator: Visually review your account’s total MMR using the Margin Indicator Tool on the trading platform.
Initial MMR (FOREX.com & MT4)
To calculate the Initial MMR when you place a trade, simply multiply the total USD notional value of your trade by the MMR % of the currency pair (Margin requirements). To help explain this calculation, please refer to the following examples:
Example 1: When counter currency is the same as your account currency
Customer buys 100,000 EUR/USD at price 1.12500 at 2% (MMR).
- Position size (100,000) times EUR/USD exchange rate at the time you place the trade (1.12500) times MMR.
- (100,000 x 1.12500 x 2%) = MMR of $2,250
Example 2: When neither base nor counter currency are your account base currency
Customer Buys 100,000 EUR/JPY at price 1.45200 (EUR/USD exchange rate* is 1.12500) at 2% MMR
*To calculate margin, we need to use the exchange rate of the Base market against your account base currency
- Position size (100,000) times EUR/USD exchange rate at the time you place the trade (1.12500).
- (100,000 x 1.12500 x 2%) = MMR of $2,250
Example 3: When base currency is the same your account base currency
Customer Buys 100,000 USD/JPY at price 1.47000 at 2% margin (MMR).
- Position size (100,000) times MMR
- (100,000 x 2%) = MMR of $2,000
Ongoing MMR (FOREX.com Platform)
The Ongoing MMR calculation for the FOREX.com platform recalculates in real time and is further explained using the examples below:
Example 1: When counter currency is the same as your account currency
Customer originally Bought 100,000 EUR/USD at price 1.12500 at 2% (MMR). Current exchange rate 1.12000.
Ongoing MMR Calculation:
- Position size (100,000) times EUR/USD exchange rate (1.11000) at the time your MMR is recalculated times MMR %.*
- (100,000 x 1.11000 x 2%) = $2,200>
Example 2: When neither base nor account currency are your account currency
Customer Bought 100,000 EUR/JPY at price 1.45200 (EUR/USD exchange rate* is 1.12500) at 2% MMR. Current EUR/USD exchange rate* is 1.12000.
*To calculate margin, we need to use the exchange rate of the Base market against your account currency
Ongoing MMR Calculation:
- Position size (100,000) times EUR/USD exchange rate at the time your MMR is recalculated (1.11000) times MMR %.*
- (100,000 x 1.11000 x 2%) = $2,200
Example 3: When base currency is your account currency
Customer Bought 100,000 USD/JPY at price 1.47000 at 2% margin (MMR).
Ongoing MMR Calculation:
- MMR remains the same for the life of the trade, no change.
Ongoing MMR Calculation:
- Position size (100,000) times EUR/USD exchange rate at the time your MMR is recalculated (1.11000) times MMR %.*
- (100,000 x 1.11000 x 2%) = $2,200
Example 3: When base currency is your account currency
Customer Bought 100,000 USD/JPY at price 1.47000 at 2% margin (MMR).
Ongoing MMR Calculation:
- Since base currency is your account currency, exchange rate equals 1 and therefore MMR remains the same throughout the life of the trade. This will remain unchanged.
What are step margin levels?
The larger the trade size, the higher the risk level associated with the trade. Therefore, we may increase our margin requirements for larger size trades or any additional trades in that instrument. To do this, FOREX.com increases the size of the margin requirement at specific quantity levels, known as step margin levels. You can view a market’s step margin levels in its Market 360 section within the FOREX.com Web Trader platform.
Step margins are not present in MetaTrader 4.
Can my account go negative?
While our 100% margin requirement and real-time margin system is designed to limit your trading losses and help ensure that total losses never exceed your total account balance, you do risk incurring losses greater than your account balance, especially during periods of extreme market volatility. While it is not FOREX.com’s policy to hold clients responsible for modest negative balances, we do reserve the right to hold clients responsible for large debit balances and when special circumstances apply. For this reason, we strongly encourage you to manage your use of leverage carefully.
How is margin handled with hedging?
The margin requirement for hedged markets is determined by the largest side (leg). This means that to the extent you carry open long position(s) and short position(s) in the same product, your combined margin will be determined as the applicable margin percentage multiplied by the position representing the largest open position.
For example, you are trading CFDs and have two open Wall Street positions, originally selling a quantity of 10 and then buying a quantity of 5. In this case, you would only the margin for the original, larger side of the trade will be applied: the Wall Street short 10 position. Assuming that the margin for selling 10 Wall Street is $1,691.45 and the margin for buying 5 Wall Street is $845.7, you would only need to provide enough margin to cover the original, larger sell position for both of the trades in this market.