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November 22, 2018

FxPro, What is Dynamic Leverage in Forex trading? How does it work?

What is Dynamic Leverage in Forex? How to calculate margin requirement?

What-is-Dynamic-Leverage-in-Forex-trading-How-does-it-work What-is-Dynamic-Leverage-in-Forex-trading-How-does-it-work

8 rules that you should know about Forex Dynamic Leverage.

What is Dynamic Leverage in Forex?

Some Online Forex and CFD brokers are using a dynamic way to calculate margin requirement needed to maintain a trade in MT4.

This calculation is automatically adjusting the required margin needed for each open position.

Through this way client is enjoying lower required margin on smaller volumes which is increasing dynamically as volume is built up.

As the volume per Instrument of a client increases, the maximum leverage offered decreases accordingly.

For MT4, MT5 and cTrader trading platform, FxPro has introduced “Dynamic Leverage” on Spot Indices, Spot Energies and Energy Futures since Friday, January 29th.

FXPro provides its traders with 4 different trading platforms. Visit the page here for the comparison of FXPro’s trading platforms.

All the existing positions will be affected by these changes, so all traders need to prepare to have sufficient margin to cover all positions.

Go to FxPro Official Website

1. Dynamic Leverage for Forex currency pairs

See the table below for the applicable Dynamic Leverage for Forex currency pairs on FXPro’s trading platforms.

Open Lots Maximum Leverage
From 0 to 100 Maximum Leverage 1:500
From 100 to 200 Maximum Leverage 1:200
From 200 to 300 Maximum Leverage 1:100
From 300 to 500 Maximum Leverage 1:50
From 500 Maximum Leverage 1:33
Note that the maximum leverage for some exotic Forex currency pairs are limited. Such as the maximum leverage for ZAR crosses is 1:100, for CNH, ILS, THB and RUB crosses is 1:50, and for DKK, CZK, HKD, TRY and SGD crosses is 1:20.

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Example of FXPro’s Dynamic Leverage on Forex pairs

Let’s say the your account leverage is 1:500.

Consider a EUR account with 300 Buy (or Sell) lots EURUSD.

In this example, the account leverage is greater than symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below.

Lots Maximum Leverage Applicable Leverage Margin
From 0 to 100 1:500 1:500 100 (Lots) * 100,000 / 500 (leverage) = 20,000 EUR
From 100 to 200 1:200 1:200 100 (Lots) * 100,000 / 200 (leverage) = 50,000 EUR
From 200 to 300 1:100 1:100 100 (Lots) * 100,000 / 100 (leverage) = 100,000 EUR

Total Required Margin is 170,000 EUR.

In this case, the utilized leverage is 1:176.47.

Go to FxPro Official Website

2. Dynamic Leverage for Precious Metals

See the table below for the applicable Dynamic Leverage for Precious Metals on FXPro’s trading platforms.

The below shows FXPro’s Dynamic Leverage for GOLD, GOLDEURO, SILVER and SILVEREURO.

Lots Margin Requirement Maximum Leverage
From 0 to 50 0.5% 1:200
From 50.01 to 100 1% 1:100
From 100.01 to 150 2% 1:50
From 150.01 4% 1:25

Note that the Dynamic Leverage applied for GOLDoz and GOLDgr are different from above, as the contract sizes are difference.

For PLATINUM, the Dynamic Leverage is fixed to 1:50 for any trading volume.

Example of FXPro’s Dynamic Leverage on Precious Metals

Let’s say the your account leverage is 1:500.

Consider a USD account with 150 Buy (or Sell) lot of Gold at spot price of 1,250 USD.

In this example, the account leverage is greater than symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below:

Lots Margin Requirement Applicable Margin Requirement Margin Margin USD
50 0.50% 0.50% 0.50% (margin req.) * 100 (oz) * 50 (Lots) * 1,250 (price of gold spot) $31,250.00
50 1.00% 1.00% 1.00% (margin req.) * 100 (oz) * 100 (Lots) * 1,250 (price of gold spot) $62,500.00
50 2.00% 2.00% 2.00% (margin req.) * 100 (oz) * 100 (Lots) * 1,250 (price of gold spot) $125,000.00

Total Required Margin is $218,750.00.

In this case, the utilized leverage is 1:85.7.

Go to FxPro Official Website

3. Dynamic Leverage for Futures

See the table below for the applicable Dynamic Leverage for Futures on FXPro’s trading platforms.

Open Lots Margin Requirement Maximum Leverage
From 0 to 50 2% 1:50
From 50 to 100 4% 1:25
From 150 to 300 16% 1:6.25
>From 300 20% 1:5

Example of FXPro’s Dynamic Leverage on Futures

Let’s say the your account leverage is 1:500.

Consider a USD account with 150 Buy (or Sell) lots of Nikkei225 Future at 18,500.

In this example, the account leverage is greater than the symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below:

Lots Margin Requirement Applicable Margin Requirement Margin Margin USD
50 2% 2% 50(Lots) *5($) *18,500 (Opening Price) * 2%(margin req.) $92,500
50 4% 4% 50(Lots) *5($) *18,500 (Opening Price) * 4%(margin req.) $185,000
50 10% 10% 50(Lots) *5($) *18,500 (Opening Price) * 10%(margin req.) $462,500

Total Required Margin is $740,000.

In this case, the utilized leverage is 1:18.75.

Go to FxPro Official Website

4. Dynamic Leverage for Energy Futures / Spot

See the table below for the applicable Dynamic Leverage for Energy Futures / Spot on FXPro’s trading platforms.

Open Lots Margin Requirement
From 0 to 20 1.00%
From 20 to 100 2.50%
From 100 5.00%

Example of FXPro’s Dynamic Leverage on Energy Futures / Spot

Let’s say the your account leverage is 1:500.

Consider a USD account with 150 Buy (or Sell) lots of Natural Gas at 3.285.

In this example, the account leverage is greater than symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below:

Lots Margin Requirement Applicable Margin Requirement Margin Margin USD
20 1% 1% 20(Lots) *10000 (Contract Size) * 3.285 (Opening Price) * 1%(margin req.) $6,570.00
80 2.5% 2.5% 80(Lots) *10000 (Contract Size) * 3.285 (Opening Price) * 2.5%(margin req.) $65,700.00
50 5% 5% 50(Lots) *10000 (Contract Size) * 3.285 (Opening Price) * 5%(margin req.) $82,125.00

Total Required Margin is $154,395.00.

In this case, the utilized leverage is 1:31.91.

Go to FxPro Official Website

5. Dynamic Leverage for Stock Indices

See the table below for the applicable Dynamic Leverage for Stock Indices on FXPro’s trading platforms.

Margin Requirement AUS200, Euro50, France40, Germany30, Japan225, UK100, US30, USNDAQ100, USSPX500 ChinaA50, ChinaHShar, France120, Germany50, Swiss20, Spain35, US2000, GerTech30, Holland25, HongKong50, UKmid250
0.20% 25
0.50% 25
1.00% 50 100
1.50% 100 100
2% 300 300
4% 750 750
10% 1,000 1,000
16% 1,250 1,250
20% (for greater than) 3,500 3,500

Example of FXPro’s Dynamic Leverage on Stock Indices

Let’s say the your account leverage is 1:500.

Consider a GBP account with 550 Lots of #UK100 at 7,300.

In this example, the account leverage is greater than symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below:

Units Size Range Margin Requirement Applicable Margin Req. Margin (Units*Margin Required*Opening Price) Margin Margin CCY
25 From 0 to 25 0.2% 0.2% 25*0.2%*7,300 365.00 GBP
25 From 26 to 50 0.5% 0.5% 25*0.5%*7,300 912.50 GBP
50 From 51 to 100 1% 1% 50*1%*7,300 3,650.00 GBP
100 From 101 to 200 1.5% 1.5% 100*1.5%*7,300 10,950.00 GBP
300 From 201 to 500 2% 2% 300*2%*7,300 43,800.00 GBP
50 From 501 to 550 4% 4% 50*4%*7,300 14,600.00 GBP

Total Required Margin is 74,277.50 GBP.

In this case, the utilized leverage is 1:54.05.

Go to FxPro Official Website

6. Dynamic Leverage for Shares

See the table below for the applicable Dynamic Leverage for Shares on FXPro’s trading platforms.

Margin Requirement 4.00 % 10.00 % 20.00 % 60.00 %
French Shares < 25,000 < 50,000 < 75,000 75,000+
German Shares < 25,000 < 50,000 < 75,000 75,000+
UK Shares < 25,000 < 50,000 < 75,000 75,000+
US Shares < 25,000 < 50,000 < 75,000 75,000+

Example of FXPro’s Dynamic Leverage on Shares

Consider a EUR account with 700 Buy (or Sell) JPMorgan Shares (US Shares) @ USD103.25 with EURUSD @ 1.1550.

Volume in USD Indicative No. of Shares Margin Requirement Opening Price Margin
$25000 242 4.0% 103.25 $25,000 (Value USD) * 4.0% (margin req.) / 1.1550 = 865.80 EUR
$25000 242 10.0% 103.25 $25,000 (Value USD) * 10.0% (margin req.) / 1.1550 = 2,164.5 EUR
$22275 216 20.0% 103.25 $22,275 (Value USD) * 20.0% (margin req.) /1.1550 = 3,857.14 EUR
$72275 700 Total Margin Required: = 6,887.45 EUR
*EURUSD rate is used to convert the 7,955 USD Margin Requirement to EUR 6,887.45 (account base currency $7,955/1.1550).

Note that some trading conditions are depending on the account type you choose.

For the list and comparison of FXPro’s all trading platforms, visit the page here.

Go to FxPro Official Website

Rules of Dynamic Leverage

Unlike the normal leverage condition, ‘Dynamic Leverage’ has several rules that you must know.

  1. Preset account leverage will be considered for Forex. The account leverage won’t affect FUTURES and METALS margin requirement and it is relevant only for FOREX margin calculation.
  2. If account leverage is less than leverage level mentioned in dynamic leverage table for FOREX, then account leverage will be considered instead.
  3. As volume is increasing, if the account leverage is greater than the appropriate leverage level, then value from dynamic leverage table will be taken into consideration.
  4. Dynamic leverage calculation is based per symbol separately. If an account is trading multiple instruments at the same time then the one instrument won’t affect margin required of another instrument.
  5. In case of hedged positions the direction with larger volumes will be considered for margin requirement.
  6. Required margin is always calculated on base currency for FOREX.
  7. For METALS and FUTURES, calculation is based on currency denominator of the each instrument.
  8. If account currency is not the same, then appropriate current rate is being used in order for required margin to be shown in account currency.

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