Margin and 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 order-aware margining?
- 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 200:1, that means you can trade a position of $50,000 with only $250.
Please note that increased leverage increases risk.
What are the margin requirements at FOREX.com?
Our margin requirements differ according to platform (FOREX.com or MetaTrader), market, asset class and position size. You can find out the specific margin of each instrument in its Market Information Sheet on the FOREX.com desktop platform.
To calculate the amount of funds required to cover the margin requirement when you open a trade, simply multiply the total notional value of your trade (quantity x price of instrument) by the margin factor.
For example, say the margin requirement for EURUSD is 0.5%. The current buy price of EURUSD is 1.300 and you wish to buy 1 standard lot (100,000).
The total value of the position is $130,000 (100,000 x 1.300). $650 would therefore be allocated from your account to open the position ($130,000 x 0.5%).
With FOREX.com platforms, you can calculate the required margin before placing a trade through the platform’s margin calculator, monitor each position’s margin requirement separately or review your account’s total margin requirement through the Margin Indicator.
Keep in mind that when you have open positions, your margin requirement for those positions will adjust to the current market pricing.
How do I change my account leverage or margin?
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 Information Sheet within the FOREX.com desktop platform.
Step margins are not present in MetaTrader platforms.
Can my account go negative?
While our margin requirements, closeout levels and real-time margin system are designed to limit your trading losses, 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.
You can request a change to your level of leverage by accessing MyAccount.
What is order-aware margining?
Some markets on the FOREX.com desktop platform may benefit from orders-aware margining, which means that placing a stop loss order on an open position will reduce the margin required to maintain that position. Information on whether a market includes orders-aware margining can be found within the Market Information Sheet within the FOREX.com desktop platform.
How is margin handled with hedging?
Hedging margin on FOREX.com’s proprietary platforms is set to the ‘largest leg,’ whereby only the margin for the larger portion of the hedge trade will be applied, and not for the shorter leg.
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.
Hedging margin on MetaTrader is set to net position, whereby the margin for each net position will be applied, no matter their size.