Margin Calculator
How to calculate margin?
Knowing how to calculate margin is a vital trading skill. Luckily, our Forex Margin Calculator can do all the calculations for you.
First, choose your currency pair, and then select your current account currency, which is the base currency for deposit.
You can then select your chosen leverage ratio, and finally, input your trade size (where 1 lot equals 100,000 units). With everything inputted, just click “calculate.”
That’s it! That’s all you need to do.
The calculator will use real-time prices to provide accurate values, depending on what data you have inputted.
Curious as to how it works?
Here’s how: firstly, imagine you wish to trade a series of different currencies at different leverage ratios, with prices of 1.00 for each respective currency.
The margin cost would be calculated as shown below, depending on the currency and leverage ratio for each:
| Account Currency | Leverage Ratio | Trade Size (Units) | Margin Cost (USD) | Margin Cost (Account Currency) |
| USD | 1:100 | 100,000 | $1,000 | $1,000 |
| EUR | 1:50 | 50,000 | €500 | €500 |
| GBP | 1:200 | 200,000 | £1,000 | £1,000 |
| JPY | 1:500 | 300,000 | ¥600,000 | ¥600,000 |
If you do need to work out your margins manually, or if you want to check how our calculator works, here is the formula for calculating margin:
Margin = (Lot Size * Contract Size * Opening Price) / Leverage
Here’s what each term means in the formula:
- Lot Size: The size of the position you want to open (in lots)
- Contract Size: The contract size in the base currency of your trading pair
- Opening Price: The price at which you open the position
- Leverage: The leverage ratio.
For example, if you wanted to open a position of 1 standard lot (100,000 units) on EUR/USD with an opening price of 1.2000 and leverage of 1:50, the calculation for your margin would be:
(1 * 100,000 * 1.2000) / 50 = $2,400
How Does Leverage Work, and What Does 1:100 Leverage in Forex Mean?
Leverage is the bedrock of modern markets. It allows traders to manage larger market positions with a small amount of capital.
In forex trading specifically, leverage is expressed as a ratio such as 1:100 or 1:500. These ratios refer to how much larger a position you can control relative to your actual trading funds.
This means that if you have $1,000 in your trading account and you’re trading with 1:100 leverage, you can control a position size of up to $100,000.
Here’s how:
Without leverage, the $1,000 in your pocket would only allow you to control a position size of $1,000. But, with a leveraged account, the broker provides additional funds for you to invest, essentially meaning you are borrowing money from your broker.
With 1:100 leverage, your $1,000 allows you to control or “borrow” at a ratio of 1:100, meaning you can maintain a position size of $100,000.
Remember, while leverage amplifies potential profits, it also magnifies potential losses. You must be cautious while using leverage, as the higher the potential upside, the higher the potential downside.
When you deposit money into a leveraged account, you must deposit a certain amount—this is the margin.
What is Margin?
A trader’s margin is the amount of money their broker demands as a deposit to open and maintain their trading position with said broker.
This “margin” acts as essentially the broker’s security deposit, just like landlords require a security deposit for a house or apartment. As the entity that is essentially lending you money to leverage trade, the security deposit for the broker ensures that traders can cover most potential losses should their positions decrease in value.
There are generally two types of margins. The first is the initial margin, which is the amount required to open a new position. The second is the maintenance margin, which is the minimum amount required to keep a position open.
If your account balance falls below either of these levels, you may receive a margin call or have your position liquidated.
What is a Margin Call?
Put simply, a margin call is when your broker demands additional margin funds. This happens when your account’s equity falls below the required margin level, usually set by the maintenance margin.
This is where traders have to deposit additional funds to meet the margin level, or sell of their position to increase their account liquidity to meet the margin call, as well as limit further losses.
For example, let’s say you have $10,000 in your trading account, and you open a position with a required margin of $2,000. If the value of your position decreases and your account equity falls to $2,500, you’ll receive a margin call because it’s below the maintenance margin level.