What is the Formula Used to Calculate Margin?

The following forex trading terms are used in the formula of how to calculate forex margin.

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

What's 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 the total amount of capital you have in your forex account.

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

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

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

Example of Formula for How to Calculate Forex Margin in MT4

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 and borrowed the rest, with this set at 100:1, the FX trader is using only 1% of their trading capital, this 1% is equal to $2683.07, if 1% is equal to $2683.07 then 100% is $268,307

Calculating Margin Formula Explained - How to Calculate Forex Margin From Trading Software