How to Calculate Forex Margin
Margin refers to the security or collateral you deposit with your broker. It covers part of the risk you generate for your broker. Your margin is a deposit on your open trade orders. You cannot afford to dismiss your margin or margin requirement.
Margin trading amplifies your potential profits and losses. It isn’t a fee, but it makes sure your account handles your trades. The margin depends on the trade amount. It’s crucial not to overload the margin. You can suffer an enormous loss if your trade fails.
Margin is a percentage of your open trading positions such as 0.25%, 1%, 2%. Using your forex broker’s margin requirement, you can figure your trading account leverage.
For instance, let’s assume your broker offers 1:40 as Forex trading leverage. This means 40 currency units in open positions require 1 unit as margin. So if your preferred Forex position is worth £40, the required margin is £1.
To calculate the margin, you divide 1/40, which is 0.25%.