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What does ‘margin’ mean and how is this calculated?

‘Margin’ is the amount of money required in your account in order to open a position. Margin is calculated based on the current price of the base currency against USD, the size (volume) of the position and the leverage applied to your trading account. If you do not have sufficient free equity available, you will be unable to open a position on the trading platform. The free margin amount shown in the trading platform is the amount you have available to use should you wish to open additional positions.

Margin is calculated using the following formula:

Margin required = (current market price x volume) / Account leverage

In practice, this would be calculated as follows:

If you open a position of 0.1 (10000) in EUR/USD at the current market price of 1.35645 and your account has a leverage of 1:400, you would calculate the margin required as follows:

(1.35645 x 10000) / 400 = $33.91

In this example, the margin on this position would be $33.91; therefore, in order to open a position of this size you would require at least $33.91 in free margin in your CFD trading account.

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