How is CFD Margin Level Calculated?

We shall first explain the various cfd margin trading terms used in cfd platforms and then explain how cfd margin level is calculated using an example on MT4 platform.

CFDs Margin, Margin Required, Equity, Used CFDs Margin & Free margin

What is Margin Required? : It is the amount of money your cfd broker requires from you to open a position. It is expressed in percentages.

What is Equity? : It is the total amount of capital you have in your trading account.

What is Used CFD Margin? : amount of money in your trading account which has already been used up when buying a cfd lot, this contract is the one that's displayed in open trade positions. As a trader you can not use this amount of money after opening a trade order transaction because you've already used it & it isn't available to you.

In other words, because your cfd broker has opened up a position for you using the capital you have borrowed, you must maintain this usable margin for your account as a security to allow you to continue using this cfd leverage he has given you.

What's Free CFD Margin? : amount in your account which you can use to open new trade positions. This is the amount of money in your account which has not yet been cfd leveraged because you've not yet opened a trade with this money - this money also is very important for you as a trader because it enables you to continue holding your open trades as will be explained below.

Example of How is CFD Margin Level Calculated on MT4 Platform?

The cfd margin example in MT4 cfd Platform below, the set cfd trading leverage ratio is 100:1, the cfd margin which is 1% is $2683.07, therefore the total amount controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest, with this set at 100:1, the trader is using 1% of their capital, this 1% is equal to $2683.07, if 1% is equivalent to $2683.07 then 100% is $268,307

How is CFDs Margin Level Calculated? - How is CFD Margin Level Calculated?