MT4 Forex Margin Level : Example of How to Calculate Leverage in MT4 Software
Margin required in this case is 1,000 dollars (your money) if it is expressed as a percentage of 100,000 dollars which you control it is:
If leverage = 100:1
1,000 / 100,000 * 100= 1%
Margin required = 1%
(1/100 *100= 1%)
"TradeForex Trading - Please simplify because I am Beginner'
(Simplify - your forex capital is $1,000 after leverage you control $100,000 - $1,000 is what percent of $100,000 - it's 1%) that is your forex margin requirement for your forex account.
The forex margin example 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
MetaTrader 4 Forex Margin Level : Example of How to Calculate Leverage on MetaTrader 4 Software
- If = 50:1 Leverage - Used Leverage
Then forex trading margin requirement = 1/50 *100= 2 %
If you have $1,000,
1,000* 50 = $50,000.
1,000 / 50,000 * 100= 2%
(Simplify - your forex trading capital is $1,000 after leverage you control $50,000 - $1,000 is what percentage of $50,000 - it is 2%) that is your forex margin requirement
- If = 20:1 Leverage - Used Leverage
Then the forex margin requirement = 1/20 *100= 5%
If you have $1,000,
1,000* 20 = $20,000.
1,000 / 20,000 * 100= 5%
(Simplify - your forex trading capital is $1,000 after leverage you control $20,000 - $1,000 is what percentage of $20,000 - it is 5%) that is your forex margin requirement
- If = 10:1 Leverage - Used Leverage
Then the forex trading margin requirement is = 1/10 *100= 10 %
If you have $1,000,
1,000* 10 = $10,000.
1,000 / 10,000 * 100= 10%
(Simplify - your forex trading capital is $1,000 after leverage you control $10,000 - $1,000 is what percentage of $10,000 - it is 10%) that is your forex margin requirement
What is The Difference Between Maximum Forex Trading Leverage & Used Forex Trading Leverage?
However, you should note that there is a difference between maximum forex trading leverage (forex leverage given by your forex broker which is the highest leverage you can trade with if you choose to) and used forex trading leverage (forex leverage depending on the lots you have opened/open trade positions). One is the broker's (Maximum Leverage) & the other is forex trader's (Used Leverage). To explain this forex used leverage & maximum leverage concept we shall use the example above:
If your forex broker has given you 100:1 Maximum forex Leverage, but you only open 1 mini lot of 10,000 dollars then Used forex Leverage is:
10,000 dollars (1 mini lot ): 1,000 dollars (your money)
10:1
Your have used 10:1 forex Leverage, but your maximum leverage is still 100:1 Leverage. This means that even if you are given 100:1 Maximum Leverage or 400:1 Maximum Leverage, you do not have to use all of it. It is best to keep your used leverage to a maximum of 10:1 but you will still choose 100:1 maximum leverage option for your forex account. The extra leverage will give you what we call Free Margin, As long as you have some Free margin on your forex account then your open forex trades will not get closed by your forex broker because this margin requirement will remain above required level.
When it comes to forex trading currencies one of your rules: money management rules on your forex trading plan should be to use leverage below 5:1.
In the above MT4 forex trading screen shot example, trader is using $2683.07, total controlled amount is $268,307, but forex account equity is $16,116.55, therefore used FX leverage is ( $268,307 divide by 16,116.55 ) = 16.64 : 1
16.64 : 1 Used forex Leverage
Forex Margin accounts allows traders to control a large amount of currency using little of their own capital while borrowing the rest
Obtaining this forex account will enable you to borrow money from the broker to trade forex lots with; the lots are worth $100,000.
The amount of borrowing power your trading account gives you what is called 'leverage', and is usually expressed as a ratio - a ratio of 100:1 means you can control resources worth 100 times your deposit.
What this means in Forex terms is that with 1% margin in your forex account you can control one standard lot/1 contract worth $100,000 with a $1,000 deposit.
However, Trading this margin forex account increases both potential for profits as well as losses. In Forex you can never lose more than you invest, losses are limited to your deposits and usually brokers will close a transaction that extends beyond your deposit amount by executing a margin call. Traders must therefore try to keep their margin level above that required. By using forex money management rules & keeping your used forex leverage below 5:1.
