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September 24, 2016

Question:What is "Margin" and how to calculate it on MT4/MT5 trading platforms?

Answer:

FXTM Brand does not provide services to residents of the USA, Mauritius, Japan (日本), Alberta, British Columbia, Quebec,
Saskatchewan, Haiti, Suriname, The Democratic Republic of Korea, Puerto Rico, and The Occupied Area of Cyprus. Find out more
in the Regulations section of their FAQs.

“Margin” is simply an amount of money which is required for having positions opened.

“Free Margin” means a free amount of money which can be used for opening additional positions.

Margin is not a commission you need pay, but it is simply a collateral for trading Forex and CFDs.

Margin Requirements

Margin Requirement varies depending on the trading symbols, leverage, trading volume and market situation.

You can see the real-time margin, free margin and currently used margin in MT4 trading platform though, margin can be calculated using the following formula:

Margin Requirement = (current market price x volume) / account leverage

As you can see in the calculation above, higher the leverage, smaller the margin required.

If you have chosen 1:1000 leverage for your FXTM’s MT4 account, then you will be required 1000 times less as margin requirement.

FXTM Official Website

Example of calculating “Margin Requirement”

EUR/USD is quoted at the current market price of 1.35645, your account has a leverage of 1:400 and you would like to trade one standard lot.

In this case, your margin calculation would be:

(1.35645 x 100,000) / 400 = $283.91

Margin Requirement = (current market price x volume) / account leverage

In this example the margin on this position would be $283.91, therefore in order to open a position of this size you would require at least $283.91 in free equity in your trading account.

If you cannot meet the margin requirement

If you have no free margin, you will not be able to open any new positions.

If the margin level goes below 50% in FXTM’s MT4, “Stop Out” will be triggered and all your open positions will be automatically closed by the system.

In certain circumstances, your account balance can become negative should the loss on the positions stopped out exceed your account balance though, as FXTM specifies on its official website, you do not need to cover exceeded loss with NBP(Negative Balance Protection).

For more information about FXTM’s trading conditions on MT4 and MT5, please visit the Official Website.

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