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March 17, 2018

Question:How to calculate Margin Level, Free Margin & Required Margin?

Answer:

Margin Level helps measure how close your account is to a margin call.

The formula to calculate your margin level is:

Equity / Initial Margin = Margin Level &

When the margin ratio decreases, your account bears more risk of liquidation/stop out.

You should monitor the margin level and if needed deposit more funds, or decrease open exposure in order to increase your margin level.

Free Margin is the total sum of funds available for initial margin at the time new positions are opened.

The formula to calculate your Free Margin is:

(Equity) – (Margin used for Currently Open Positions) = Free Margin

Required Margin refers to the amount required for you to open and maintain a position.

Required Margin also factors in the initial loss as a result of spread.

Required Margin is derived through the following formula:

(Volume * Instrument Price) / Leverage + (Volume * Spread) = Total Margin Required

For example: If you buy 10 barrels of oil at 51.30, then the calculation for Required Margin is:

(10*51.30)/100 + (10*0.05) = 5.63 USD

Maintenance Margin refers to the minimum equity you need to keep positions open.

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