Margin and leverage

Margin and leverage are among the most important trading concepts to understand. If you’re new to trading, we highly recommend you read on.

Financial chart

What is margin?

Margin is how much money you need to have in your account to open a trade.

What is leverage?

Leverage enables you to put up a fraction of the deposit to access a much larger trade size.  

For example, in the case of 50:1 leverage (or 2% margin required), $1 in a trading account can control a position worth $50.

Please be aware that increasing leverage increases risk.


How does leverage work?

Let's look at a typical USD/CAD (US dollar against Canadian dollar) trade. To make a $100,000 USD/CAD trade without leverage would require the trader to put up $100,000 in account funds, the full value of the position. But with 50:1 leverage (or 2% margin required), for example, only $2,000 of the trader's funds would be required to open that $100,000 USD/CAD position.


Illustration of minimum account balance needed to hold position. Example: USD/CAD with minimum balance for 2% leverage(50:1)


Magnified profits and losses

While a margin amount of only 1/50th of the actual trade size is required from the trader to open this trade, any profit or loss on the trade would correspond to the full $100,000 leveraged amount.

In the case of USD/CAD at the current market price, this would be a profit or loss of around $10 per one-pip move in price. This illustrates the magnification of profit and loss when trading positions are leveraged with the use of margin.

Margin requirements

It is important to note that in leveraged forex trading, margin privileges are extended to traders in good faith to facilitate more efficient trading of currencies.

As such, it is essential that you maintain at least the minimum margin requirements for all open positions at all times to avoid any unexpected liquidation of trading positions.

Use our Margin & Pip Calculator to see how much a single point of movement is worth – as well as how much margin you'll need to trade.

Margin close out / liquidation

If your margin level is at or below the margin close out (MCO) level, we are required to close any or all of your open positions as quickly as possible; this is to protect you from incurring further losses.

We strongly recommend that you monitor your margin level carefully, as you should not expect to receive a margin call or warning prior to closure. The Margin Level Indicator on the trading platform makes monitoring your margin level simple.

The calculation for the margin level indicator is determined by the Net Equity in your account divided by your Total Margin Requirement, multiplied by 100.

To improve your margin indicator, do one or more of the following:

  • Deposit funds
  • Close or reduce positions
  • Add a stop or limit order

Please be aware that during times of high volatility market prices can gap and this may affect the prices at which your positions are closed out.

Frequently asked questions

What are the margin requirements at FOREX.com?

Our margin requirements differ according to platform (FOREX.com or MetaTrader), market, asset class and position size. You can find the specific margin of each instrument in its Market Information Sheet on the FOREX.com platform.

To calculate the amount of funds required to cover the margin requirement when you open a trade, simply multiply the total notional value of your trade (quantity x price of instrument) by the margin factor.

For example, say the margin requirement for EUR/USD is 2%. The current buy price of EURUSD is 1.300 and you wish to buy 1 standard lot (100,000).

The total value of the position is $130,000 (100,000 x 1.300). $2,600 would therefore be allocated from your account to open the position ($130,000 x 2%).

With FOREX.com platforms, you can calculate the required margin before placing a trade through the platform’s margin calculator, monitor each position’s margin requirement separately or review your account’s total margin requirement through the Margin Indicator.

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What are step margin levels?

The larger the trade size, the higher the risk level associated with the trade. Therefore, we may increase our margin requirements for larger size trades or any additional trades in that instrument.

To do this, FOREX.com increases the size of the margin requirement at specific quantity levels, known as step margin levels.

You can view a market’s step margin levels in its Market Information Sheet within the FOREX.com platform.

Step margins are not present in MetaTrader 4.

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