How to Calculate Oil Trading Margin Example

What is Margin in Oil Trading

The definition of Oil Trading Leverage is having the ability to control a big amount of money using very little of your own money & borrowing the rest - this is what makes the oil market to attract many investors.

We shall explain oil leverage first & then explain oil margin in this learn how to calculate oil leverage and margin tutorial.

Example:

We shall us this example to explain what oil leverage is? If your oil broker gives you oil leverage of 100:1 (this is the best option to choose as a maximum for any account)

This means you borrow 100 dollars for every dollar you've in your oil trading account.

To put in another way your oil broker gives you 100 dollars for every 1 dollar in your trading account. This is what's known as crude trading leverage.

This means if you open an account with $1,000 & your oil leverage is 100 : 1, then you'll get $100 for every $1 you that you have in your trading account, the total amount which you will control is:

If for 1 dollar the broker gives you 100

Then if you have 1,000 you will get a total of:

$1,000 * 100 = 100,000 dollars

Now you control 100,000 dollars of Investment

Most new oil traders ask what oil leverage is best oil leverage for 1,000 dollars, or 2,000 dollars, or 5,000 dollars oil account? - The best oil leverage option to choose when opening a live crude oil account is always 100:1 & not 400:1.

What is Crude Oil Trading Margin?

This is the amount of money required by your oil broker in order to allow you to continue trading with borrowed amount.

In other words the question what is margin in Oil? can be explained as money required to cover open crude oil trades and is expressed in percentage. For 100:1, amount you'll control is 100,000 dollars as explained in above example.

Now can you compare someone investing $1,000 with another one that is investing $100,000? Obviously Not. This is how it works, it takes you from that retail investor investing $1,000 to that one investing $100,000. Where does this extra money originate from? : You borrow itfrom your oil broker in what is simply referred to as Oil Leverage. This money that you borrow, you borrow it against the $1,000 dollar of your own money which you deposit with your oil broker. If you were to explain what this oil leverage means - then it is the ability to control a big amount of money using very little of your own money & borrowing the rest. Otherwise, if you were trade Oil without this oil leverage it would not be as profitable as it is, in fact you can still select not to use oil leverage, using 1:1 leverage option but you would not make money and it would take too long to make any profit.

Example of how to calculate oil leverage and margin:

Margin required in this case is 1,000 dollars (your money) if it is expressed as a percent 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%)

"Trade Forex Trading - Please simplify because I am Beginner"

(Simplify - your capital is $1,000 after oil leverage you control $100,000 - $1,000 is what percent of $100,000 - it is 1%) that is your margin requirement for your crude oil account.