Margin

Margin is the minimum amount of money that a Forex broker requires a trader to have in their account to open and maintain a trade. It is expressed as a percentage of the trade size. 

For example, if a Forex broker offers a maximum leverage of 30 to 1 on trading the USD/JPY currency pair, and you want to open a trade of 1 lot of USD/JPY which is worth $100,000, then the broker will require that you have at least $3,333.34 in your account to open the trade – in other words, 3.33% of the position size. 

A broker offering maximum leverage of 30 to 1 requires a margin deposit of 3.34%. 

It is easy to see why margin and leverage can always be calculated from each other by a simple formula. If you know one, you can determine the other. 

A Forex margin calculator will tell you that margin = 1/leverage (where leverage is the X in the X to 1 leverage expression). 

A Forex leverage calculator will tell you that leverage = 1/margin (where margin is expressed as a percentage). 

These are simple calculations which you can do yourself, most people find they don’t really need to use the calculators. 

The table below shows how leverage and margin relate to each other at benchmark rates. Note how the margin required as a percentage is also the price movement which would wipe out an account leveraged at that level. Read more ...