Margin & Leverage FAQs
- What is margin?
- What is leverage?
- What are the margin requirements at FOREX.com?
- How do I change my account leverage or margin?
- What are step margin levels?
- Can my account go negative?
- What is FOREX.com's liquidation process?
- How can I prevent liquidation of my open positions?
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 50:1, that means you can trade a position of $50,000 with only $1,000. 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 (MT4 Platform)
The Ongoing MMR calculation in MT4 recalculates your MMR once per day. This process will run every day at 4:00PM EST 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
*Process begins at 4pm.
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
*Process begins at 4pm.
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
*Process begins at 4pm.
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.
How do I change my account leverage or margin?
The FOREX.com platform does not support changing from the default leverage setting of 50:1. MetaTrader 4 accounts can be reduced to 10:1 and 20:1. Keep in mind that increased leverage increases risk. Please fill out a Margin Change Request Form and submit it to [email protected].
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.
The FOREX.com platform does not support changing from the default leverage setting of 50:1. MetaTrader 4 accounts can be reduced to 10:1 and 20:1. Keep in mind that increased leverage increases risk. You can request a change to your level of leverage by filling out a Margin Change Request Form and submitting it to [email protected].
What is FOREX.com's liquidation process?
You are responsible for monitoring your account and maintaining 100% of required margin at all times to support your open positions.
If at any point, the equity available drops below 100% of the margin required you will be subject to auto liquidation of the position incurring the largest loss. The liquidation process for FOREX.com proprietary platforms is as follows: the net aggregated open position with the greatest unrealized loss is closed first, followed by the next largest losing net position and so on, until the maintenance margin requirement is satisfied or exceeded. Depending on the size and unrealized P&L of the open positions, all open positions may be liquidated in order to meet the margin requirement.
The liquidation process for the MT4 platform is slightly different in that the system identifies the largest losing position and begins liquidating individual trades within that position in FIFO order until your margin requirement is satisfied or exceeded. Depending on the size and unrealized P&L of the open positions, all open positions may be liquidated in order to meet the margin requirement.
You can also setup alerts so you are notified by e-mail when the available margin in your account falls below 120% of the margin requirement. Please note that this notification is for your convenience and should not be relied on to protect your account.
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. For this reason, we strongly encourage you to manage your use of leverage carefully. Increasing leverage increases risk.
How can I prevent liquidation of my open positions?
There are several proactive measures that you can employ to prevent liquidation and manage risk:
- Actively monitor the status of your open positions.
- Specify a stop-loss order for each open trade to limit downside risk. You can specify the stop-loss rate at the time you issue a trade, or add a stop-loss order at any time for any open trade. You can also change your stop-loss orders at any time to take current market prices or other conditions into account. The use of stop loss orders may not necessarily limit your losses.
- Keep your account funded in excess of your required margin. These extra funds act as a cushion, protecting you if the market moves against you. If you are in danger of breaching your margin limits, either incrementally reduce the size of your position or add funds to your account as soon as possible.
- Employ lower leverage. You may request a leverage change at any time.
Learn more about managing risk.