How is Forex Margin Level Calculated?

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

Forex Margin, Margin Required, Equity, Used Margin and Free margin

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

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

What's Used Margin? : amount of money in your account which has already been used up when buying a currency contract, this contract is the one that is displayed in open trades. As a trader you can't use this amount of money after opening a trade order because you have already used it and it is not available to you.

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

What is Free 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 leveraged because you have not yet opened a transaction with this money - this money also is very important for you as a investor because it enables you to continue holding your open trades as will be explained below.

Example of How is Forex Margin Level Calculated in MetaTrader 4?

The forex margin examples on MetaTrader 4 forex Platform below, the set leverage is 100:1, the forex 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 FX 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 Forex Margin Level Calculated? - Example of How is Margin Level Calculated in MT4?