Tickmill margin calculator

When you trade with a larger amount, as leverage enables you to do, you can open bigger positions and potentially earn larger profits.

Today forex bonuses

Leverage & Margin, tickmill margin calculator.

However, with bigger positions you also have a higher risk whereby your losses could also be larger.
Once your documents are approved, create a live trading account.

Leverage & margin

Defining how you trade with tickmill.

Trading conditions
to enhance your success

As you start your trading career, two of the most fundamental concepts for you to grasp is the use of leverage & margin and, how the leverage determines the required margin.

Check out the margin and leverage that we offer below:

The use of leverage & margin

What is leverage?

Technically, leverage is where a trader has a large sum at their disposal while using a significantly smaller amount of their own funds. They effectively borrow the rest from their broker.

For example, if you’re trading with a 1:100 leverage, and you have $1,000 USD in your account, you’ve got $100,000 available for trading. Although this sounds like an insanely good opportunity, you must always remember that it’s a double-edged sword.

When you trade with a larger amount, as leverage enables you to do, you can open bigger positions and potentially earn larger profits. However, with bigger positions you also have a higher risk whereby your losses could also be larger.

What is margin?

It may be easier to understand if you think of the margin as a deposit for the trade that you want to open and maintain. The broker that you’re trading with will keep a portion of your balance to cover the potential loss of that trade. Once you close the position, the margin will be put back into your account.

The margin that you need for a trade is normally expressed as a percentage of the whole trade and is called the ‘margin requirement’. You’ll be given a margin requirement for every trade that you open, and it will vary depending on the instrument that you trade and the broker that you choose to trade with.

How do you calculate the margin requirement?

Well, the required margin will be a percentage of the size of the trade that you want to open and is calculated according to the base currency of the pair that you want to trade. Using the equation below you can work out how much margin you’ll need for each trade.

Required margin = position size X margin requirement

For example:
you’d like to open a mini lot (10,000 base units) in USDJPY. How much margin do you need to open the position?

As the USD is the base currency, the position size (or notional value) is 10,000 USD. Your broker has given you a margin requirement of 5%.

CALCULATING MARGIN

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Tickmill is the trading name of tickmill group of companies.

Tickmill.Com is owned and operated within the tickmill group of companies. Tickmill group consists of tickmill UK ltd, regulated by the financial conduct authority (registered office: 3rd floor, 27 - 32 old jewry, london EC2R 8DQ, england), tickmill europe ltd, regulated by the cyprus securities and exchange commission (registered office: kedron 9, mesa geitonia, 4004 limassol, cyprus), tickmill south africa (pty) ltd, FSP 49464, regulated by the financial sector conduct authority (FSCA) (registered office: the colosseum, 1st floor, century way, office 10, century city, 7441, cape town), tickmill ltd, address: 3, F28-F29 eden plaza, eden island, mahe, seychelles regulated by the financial services authority of seychelles and its 100% owned subsidiary procard global ltd, UK registration number 09369927 (registered office: 3rd floor, 27 - 32 old jewry, london EC2R 8DQ, england), tickmill asia ltd - regulated by the financial services authority of labuan malaysia (license number: MB/18/0028 and registered office: unit B, lot 49, 1st floor, block F, lazenda warehouse 3, jalan ranca-ranca, 87000 F.T. Labuan, malaysia).

Clients must be at least 18 years old to use the services of tickmill.

High risk warning: trading contracts for difference (cfds) on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade contracts for difference (cfds), you should carefully consider your trading objectives, level of experience and risk appetite. It is possible for you to sustain losses that exceed your invested capital and therefore you should not deposit money that you cannot afford to lose. Please ensure you fully understand the risks and take appropriate care to manage your risk.

The site contains links to websites controlled or offered by third parties. Tickmill has not reviewed and hereby disclaims responsibility for any information or materials posted at any of the sites linked to this site. By creating a link to a third party website, tickmill does not endorse or recommend any products or services offered on that website. The information contained on this site is intended for information purposes only. Therefore, it should not be regarded as an offer or solicitation to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to make such an offer or solicitation, nor regarded as recommendation to buy, sell or otherwise deal with any particular currency or precious metal trade. If you are not sure about your local currency and spot metals trading regulations, then you should leave this site immediately.

You are strongly advised to obtain independent financial, legal and tax advice before proceeding with any currency or spot metals trade. Nothing in this site should be read or construed as constituting advice on the part of tickmill or any of its affiliates, directors, officers or employees.

The services of tickmill and the information on this site are not directed at citizens/residents of the united states, and are not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Margin calculator

Profit margin calculator

Calculate the profit margin of making, trading products, or doing business in general. Please provide any two of the following to calculate the third value.

Result

Stock trading margin calculator

Calculate the required amount or maintenance margin needed for investors to make securities purchase on margin.

Result

Amount required: $549.00

Currency exchange margin calculator

Calculate the minimum amount to maintain in margin account to make currency trading.

Result

Amount required: 6.500

The word "margin" has many different definitions within different contexts, such as referring to the edge or border of something, or the amount by which an item falls short or surpasses another item. Financially, margin can refer to several specific things. The first is that it can be the difference between a product or service's selling price and its cost of production (what is used by the first calculation), or it can be the ratio between a company's revenues and expenses. It can also refer to the amount of equity contributed by an investor as a percentage of the current market value of securities held in a margin account (related to the second and third calculation), or the portion of the interest rate on an adjustable-rate mortgage added to the adjustment-index rate.

Profit margin

Profit margin is the amount by which revenue from sales exceeds costs in a business, usually expressed as a percentage. It can also be calculated as net income divided by revenue, or net profit divided by sales. For instance, a 30% profit margin means there is $30 of net income for every $100 of revenue. Generally, the higher the profit margin, the better, and the only way to improve it is by decreasing costs and/or increasing sales revenue. For many businesses, this means either increasing the price of products or services or reducing the cost of goods sold.

Profit margin can be useful in several ways. For starters, it is commonly used as a way to gauge the financial health of a business. For instance, a year that is off track with respect to typical profit margins in past years can be an indication of something wrong, such as the mismanagement of expenses relative to net sales. Secondly, profit margin is a measure of efficiency, as it helps answer the question: how much profit is received for each dollar earned as revenue?

Profit margin can also be compared to the performance of competing companies in order to determine relative performance as made transparent by industry standards. It is important that the companies being compared are fairly similar in terms of size and industry. For example, comparing the profit margins of a small family restaurant to that of a fortune 500 chemical company would not yield particularly relevant results because of the differences in industry and scale.

Margin trading

Margin trading is the practice of using borrowed funds from brokers to trade financial assets; this essentially means investing with borrowed money. Usually there is collateral involved, such as stocks or other financial assets of value.

Buying stocks using borrowed money is known as "trading on margin." margin trading tends to amplify gains and/or losses; for instance, when the price of assets in an account rises, trading on margin allows investors to use leverage to increase their gains. However, when the prices of these assets fall, the loss in value is much greater than the regular trading of assets. Regardless, federal regulations only allow investing borrowers to borrow up to 50% of the total cost of any purchase as the initial margin requirement. Afterwards, federal reserve regulation T requires maintenance margin requirements of at least 25%, though brokerage firms generally require more. Keep in mind that initial margin requirements are different from maintenance margin requirements.

This form of margin investing is highly risky and investors (borrowers) should familiarize themselves with the risks first.

Currency exchange margin

In the context of currency exchange, margin can be thought of as a good faith deposit required to maintain open positions, similar to a security deposit that is required for renting. However, it is not a fee, but a portion of account equity that is allocated as a margin deposit.

A margin requirement is the leverage offered by a broker, and is usually updated at least once a month to account for market volatility or currency exchange rates. A 2% margin requirement is the equivalent of offering a 50:1 leverage, which allows an investor to trade with $10,000 in the market by setting aside only $200 as a security deposit. As another example, a 1% margin requirement is referred to as a 100:1 leverage, and allows $10,000 to be traded in the market with a $100 security deposit. In the foreign exchange market, traders tend to trade with leverages of 50:1, 100:1, or 200:1 depending on broker and regulations.

If the market moves against a trader, resulting in losses such that there is an insufficient amount of margin, an automatic margin call will apply. This usually happens because there is no more money in the account to withstand the loss in value of equities, and the broker starts to become responsible for losses. In this scenario, unless the account holder deposits funds to bring the account back up to the minimum maintenance required, the broker closes all of the account holder's positions in the market and places limits on the losses for the account holder in order to stop the account from turning into a negative balance.

Margin calculator

Use this gross margin calculator to easily calculate your profit margin (operating margin), your gross profit or the revenue required to achieve a given margin. Enter the cost and either the total revenue, the gross profit or the gross margin percentage to calculate the remaining two.

How to use the margin calculator?

This versatile profit margin calculator will help you calculate:

Profit, gross profit margin and markup given cost and gross revenue.

Revenue, gross profit margin and markup given cost and gross profit.

Revenue, profit and markup given the cost and the profit margin.

Simply enter the cost and the other business metric depending on the desired output and press "calculate". You can copy/paste the results easily using the clipboard icon next to each value.

What is gross profit margin?

The gross profit margin (a.K.A. Operating margin, operating profit margin, operating income margin, EBIT margin) is a key business performance metric indicating the profitability of a company, product or investment project. It is great for internal comparisons of one period versus another, identifying trends in profitability, as well as comparisons to businesses of similar industries, niches, sizes and age.

The profit margin is so key as it communicates the percentage of total revenue converted to operating profits (before tax profits). It is often used by investors as an efficiency ratio or percentage metric as it is a proxy for potential dividend payouts, reinvestment potential and overall solvency. The result is a measurement of what proportion of a company's revenue is left over, before taxes and other indirect costs (such as bonuses, interest rate payments), after paying for variable production costs such as wages, source materials, contractors, etc. A higher operating margin means that the company has less financial risk as it is able to face fixed cost expenses with greater ease.

Gross margin formula

The formula for gross margin is:

Margin = operating income / revenue

Operating income is also called "operating profit" whereas revenue is total value of sales. In many cases the total costs and revenue are known and what is sought is the operating income and margin. In such circumstances the following formula is more suitable, which is why it is used in our gross margin calculator:

Margin = (revenue - cost) / revenue

Both input values are in the relevant currency while the resulting profit margin is a percentage arrived at after multiplying the result by 100. Note that our profit margin calculator does not do any currency conversions, so make sure you input the values in the same currency.

Knowing the formula above, you should start with estimating the cost of production, which includes all variable costs of producing the goods or services the business sells. If calculating for a past period, you would already know the gross revenue that was made by selling the goods or services. Simply plug in the numbers in formula #2 above and you will get the result. For example, if the costs are $100,000 and the revenue is $120,000 the equation becomes: margin = (120,000 - 100,000) / 120,000 = 20,000 / 120,000 = 1/6 which is the margin ratio telling you that for every 6 dollars in sales the business pockets 1 dollar in profit. To convert to percentage, multiply by 100: 1/6 * 100 = 16.67% operating profit margin.

If you know only the cost and the profit, simply add the two together to get the revenue, then substitute in equation #2 again. If what you want to calculate is the profit and/or revenue required to achieve a given margin, then simply input the cost and the margin percentage in our calculator and it will handle the rest.

What is a good gross profit margin?

While a profit margin calculation is useful in itself, some might need more context to interpret the numbers. Generally, a good profit margin should allow the business to cover its variable and fixed expenses and turn a profit with which to compensate the capital owners for their risk (time preference). This is individual to every business or investment project and what is a "good profit margin" depends very much on the options it is compared with, as well as the estimated risk.

Margin calculator

This margin calculator will be your best friend if you want to find out an item's revenue, assuming you know its cost and your desired profit margin percentage. That's not all though, you can calculate any of the main variables in the sales process - cost of goods sold (how much you paid for the stuff that you sell), profit margin, revenue (how much you sell it for) and profit - from any of the other values. In general, your profit margin determines how healthy your company is - with low margins you're dancing on thin ice and any change for the worse may result in big trouble. High profit margins mean there's a lot of room for errors and bad luck. Keep reading to find out how to find your profit margin and what is the gross margin formula.

We have a few calculators that are similar in nature - you can check out our margin with VAT (or sales tax), margin with a discount or the very similar markup calculator. If you are running a business, you may find our VAT calculator and sales tax calculator convenient, too. If you are starting your own business, feel free to visit our collection of start up calculators to get you on your feet.

How to calculate profit margin

Find out your COGS (cost of goods sold). For example $30 .

Find out your revenue (how much you sell these goods for, for example $50 ).

Calculate the gross profit by subtracting the cost from the revenue. $50 - $30 = $20

Divide gross profit by revenue: $20 / $50 = 0.4 .

Express it as percentages: 0.4 * 100 = 40% .

This is how you calculate profit margin. Or simply use our gross margin calculator!

As you can see, margin is a simple percentage calculation, but, as opposed to markup, it's based on revenue, not on cost of goods sold (COGS).

Gross margin formula

The formula for gross margin percentage is as follows: gross_margin = 100 * profit / revenue (when expressed as a percentage). The profit equation is: profit = revenue - costs , so an alternative margin formula is: margin = 100 * (revenue - costs) / revenue .

Now that you know how to calculate profit margin, here's the formula for revenue: revenue = 100 * profit / margin .

And finally, to calculate how much you can pay for an item, given your margin and revenue (or profit), do: costs = revenue - margin * revenue / 100

A note on terminology

All the terms (margin, profit margin, gross margin, gross profit margin) are a bit blurry and everyone uses them in slightly different contexts. For example, costs may or may not include expenses other than COGS - usually, they don't. In this calculator, we are using these terms interchangeably and forgive us if they're not in line with some definitions. To us, what's more important is what these terms mean to most people, and for this simple calculation the differences don't really matter. Luckily, it's likely that you already know what you need and how to treat this data. This tool will work as gross margin calculator or a profit margin calculator.

So the difference is completely irrelevant for the purpose of our calculations - it doesn't matter in this case if costs include marketing or transport. Most of the time people come here from google after having searched for different keywords. In addition to those mentioned before, they searched for profit calculator, profit margin formula, how to calculate profit, gross profit calculator (or just gp calculator) and even sales margin formula.

Margin vs markup

The difference between gross margin and markup is small but important. The former is the ratio of profit to the sale price and the latter is the ratio of profit to the purchase price (cost of goods sold). In layman's terms, profit is also known as either markup or margin when we're dealing with raw numbers, not percentages. It's interesting how some people prefer to calculate the markup, while others think in terms of gross margin. It seems to us that markup is more intuitive, but judging by the number of people who search for markup calculator and margin calculator, the latter is a few times more popular.

Margin calculator

Create your portfolio and see exactly how much margin money is required to construct it. The margin calculator breaks down each and every type of margin required ( exposure, var, ELM, and net premium).

Required margin for this strategy

upfront margin	र 0.00
exposure margin	र 0.00
value at risk margin	र 0.00
extreme loss margin	र 0.00
net premium	र 0.00
total amount required	र 0.00

Futures and options guide

RKSV securities: SEBI registration no. INZ000185137 | NSE member code: 13942 | BSE clrg code: 6155 | CDSL: IN-DP-CDSL- 00282534 | NSDL: IN-DP-NSDL-11496819 | CDSL: IN-DP-CDSL- 00283831 | NSDL: IN-DP-NSDL-11497282 | RKSV commodities MCX member code: 46510 | SEBI regn. No. INZ000015837 | RKSV securities CIN number : U74900DL2009PTC189166 | RKSV commodities CIN number: U74110DL2012PTC236371 | compliance officer: mr. Hiren thakkar. Tel no: (022) 24229920. Email: compliance@rksv.In | registered address: 807, new delhi house barakhamba road, connaught place, new delhi- 110001. | correspondence address: RKSV/upstox, 30th floor, sunshine tower, senapati bapat marg, dadar (W), mumbai, maharashtra 400013. For any complaints, email at complaints@upstox.Com and complaints.Mcx@upstox.Com | to lodge your complaints using SEBI SCORE, click here | please ensure you carefully read the risk disclosure document as prescribed by SEBI and our terms of use and privacy policy.

The brand name upstox and logo are the registered trademarks of RKSV securities india pvt. Ltd. | the cost-effective brokerage plans make upstox a trustworthy and reliable online stockbroker. Available on both the web and mobile, it offers unmatched convenience to traders. If you are considering opening a demat account online, then upstox is just the right place for you.

Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing.
*brokerage will not exceed the SEBI prescribed limit

How to use span calculator?

Step 1: select exchange

Step 2: select segment

Step 3: select the ticker

Step 4: select expiry date

Step 5: select side

Step 6: specify the quantity

This option has no list. It is blank where you need to enter the quantity of the security mentioned in numbers.

Once you specify all the above details, click on the ‘add’ button.

After you click on this button, you will see a table below. It will contain all the required margins. A total amount required will also be specified in this table.

You can even change the details like exchange, quantity, and ticker as many times as you want.

This is the ideal margin calculator by upstox for all traders. You can also use it as a future margin calculator, an option margin calculator (or simply put, an F&O margin calculator), as well as an equity margin calculator. Click here to try it out.

How to calculate margin

In this article we are going to look at what the margin is and how it changes dependent on leverage, position size, currencies traded and your account currency. We will also learn how to calculate margins in different trading scenarios.

What is the margin?

The margin is the amount of money that your forex broker will require from you to open a trade. In financial terms, it is the collateral needed to access the leverage required for your trade. To calculate it accurately you need to know four things:

The amount of leverage you are using

The position size of your trade

The base currency of your trade

Your account currency

Calculating margin: leverage

Margin is inversely proportional to leverage and can be expressed as a percentage of the full amount of the position.

Margin = 1/leverage

Example 1: A 50:1 leverage ratio means a margin requirement of 1/50 = 0.002 = 2% margin requirement. Example 2: A 100:1 leverage ratio means a margin requirement of 1/100= 0.001 = 1% margin requirement. Letвђ™s assume that you have a balance of 5,000 USD in your trading account.В you decide to trade one lot (100,000 USD) of the USD/EUR pair. The table below shows your margin size relative to varying amounts of leverage: as you can see, with 1:50 leverage you use almost half of your account balance as the margin. This doesnвђ™t leave you with much capital to make additional trades, especially if your trade performs poorly and you lose your investment. Equally, lower margin requirements mean more money in your account to use for other trades. The higher the leverage used, the smaller your margin will be. Itвђ™s important to note that no matter the leverage, the margin requirement can vary significantly depending on which currency pair you are trading. This is because margin is always calculated in the base currency and then converted to your account currency.

Calculating margin: examples

Before you place a trade, you should have a rough idea of the margin requirement. This will get easier to approximate the more experience you have with trading. To calculate the margin accurately, you can use the following formula as long as the base currency is the same as your account currency:

Margin requirement = (position size) / leverage

Letвђ™s consider the following example:

Buying AUD/USD

Position size = 300,000 (3 lots)

Account leverage = 1:100

Account currency: AUD

Margin requirement = 300,000 / 100 = 3000 AUD

So you need to have at least 3000 AUD in your account as collateral to open that position. Otherwise, your order will be rejected due to insufficient margin. Letвђ™s now compare the margin needed for two different currency pairs and see how this can cause significant variations: example 1:

Pair: GBP/AUD

Position size: 100,000 (1 lot)

Leverage: 1:100

Account currency: USD

Margin requirement = USD 1246.1

Pair: AUD/USD

Position size: 100,000 (1 lot)

Leverage: 1:100

Account currency: USD

Margin requirement = USD 692.6

In example 1 (GBP/AUD) the margin requirement is almost double that for example 2 (AUD/USD), despite the leverage and position size being the same вђ“ lets find out why. Lets looks at example 1 first: the GBP/AUD is a cross pair not involving USD вђ“ our account currency. For currency pairs not quoted in your account currency, you need an additional calculation:

Margin requirement = [(position size) / leverage] * base/account currency exchange rate

Instead of using the GBP/AUD exchange rate to calculate our margin we use the base/account currency exchange rate (GBP/USD).В the base currency from the GBP/AUD pair is the GBP, while our account currency is USD, so we need the rate of GBP/USD (1.2461) to calculate the margin requirement in USD. So the formula above looks like this:

Margin requirement = [100,000 / 100 ] * 1.2461В

Margin requirement = 1246.1 USD

Now, letвђ™s look at example 2: even though the USD is one of our currency pair, it is not the base pair вђ“ that is AUD. So we have to convert the position size from AUD to USD, our account currency. The AUDUSD exchange rate is 0.6926 so our formula looks like this:

Margin requirement = [100,000 / 100 ] * 0.6926 В

Margin requirement = 692.6 USD

Conclusion having a good understanding of margin requirements is essential to trading because it directly affects the size and number of trades that you can safely make. The lower your leverage, the higher your margin requirements will be, and you will need to put up more money as collateral to open a position. Finally, always be aware that trading a pair with a base currency that is not your account currency can drastically alter your margin size. Before you open this type of trade always calculate the margin requirements first.

Margin calculator

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Disclaimer: it is possible that you can lose all of the money you deposit, and in some circumstance you may even be required to deposit additional sums to cover you loses. By undertaking these types of high risk trades you acknowledge that you are trading with your available risk capital and any losses you may incur will not adversely affect your lifestyle. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. This website is neither a solicitation nor an offer to buy or sell currencies, futures, or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. Website owners and affiliates will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Trading foreign exchange, commodity futures, options, precious metals and other over-the-counter or no-exchange products carries a high level of risk and may not be suitable for all investors.

Forex trading on margin

Forex trading on margin accounts is the most common form of retail forex trading. This article explains what ‘margin’ is, shows a margin calculator or ‘formula’ and how to use this free margin safely. Understanding margin requirements, and how leverage levels affect it, is a key part of trading forex successfully.

Margin definition

In the trading world, a margin account involves borrowing in order to gain a greater potential ROI (return on investment). Many investors make use of margin accounts when implementing a strategy to invest in equities using the leverage of borrowed money.

This enables them to control a greater position than their own invested capital would.

Margin accounts are operated by the investment broker, and are settled in cash each day. Equities are not the only investment type that margin accounts are suited to – currency traders in the forex market regularly use them too.

To begin, forex traders need to sign up with their preferred broker. Once they are registered, they will need to set up a margin account.

A margin account in forex is very similar to one for equities – in a nutshell, the investor takes out a short-term loan from their broker.

The size of the loan is equal to the amount of leverage the investor takes on.

The core meaning of leverage is the ability to control large amounts of money using very little of your own capital and borrowing the rest. Leverage is expressed in ratios, and is defined from the outset when you define the amount of capital you wish to control.

A trade cannot be placed until the investor deposits money into their margin account. The amount that must be deposited depends on the margin percentage that is agreed for the leverage.

Interest / rollover

No interest is directly paid on the borrowed amount, but there will be a delivery date attached, and if the investor fails to close their position in time then it will rollover.

In this case, there may be interest charged depending on whether the investor’s position is long or short, as well as the short-term interest rates of the currencies in question.

The money the investor puts into the margin account acts as a security deposit of sorts for the broker. If the investor’s position worsens and a loss looks likely, the broker may make a margin call. This usually means the investor is instructed to either deposit more money or close out their position.

The purpose of this is to minimise the risk to both parties.

Margin explained

Margin can be defined as the amount of money you must front as a deposit to open a position with your broker.

The broker uses this deposit to maintain your position. Margin deposits are usually taken from clients and pooled together for a fund to place trades within the interbank network.

Margin will typically be expressed as a percentage of the full amount of a position. The majority of forex brokers will require anything from a low margin of 0.25%, 0.5%, 1% or 2% up to higher-level margins.

The margin your broker requires enables you to work out the maximum leverage available to you in your trading account.

Let’s say your broker requires a 1% margin to control a £100,000 position. This will mean that your broker sets aside £1,000 from your account, and the remaining £99,000 will be supplied as leverage.

This a margin of 1% and a leverage of 100:1, and you are using margin to control currency to the sum of £100,000. That £1,000 deposit you contribute is the margin you give in order to be free to use the broker’s leverage.

If your broker requires a 2% margin, the leverage will be 50:1. A 5% margin means leverage of 20:1, and so on.

This primary definition of ‘margin’ is common to all accounts, but you will probably see other ‘margin’ terms on your platform. In addition to margin requirement, you may also see:

Used margin: this is the money the broker has locked in to keep your current positions open.

Usable margin: this refers to the money in your account that can be used to open new positions.

Margin call: this happens when the money you have in your account is insufficient to cover your possible loss.

Accounts

You can expect the type of account you hold with a broker to have an impact on the available margin and leverage.

If you hold a standard account only with a broker, the available leverage is likely to be considerably lower, and the margin required to secure that leverage will be higher.

This is because you are likely to be less experienced and working with smaller amounts of money than those who hold higher-level accounts, such as professional and VIP.

Brokers take on a certain amount of risk with every client, and when engaging in margin trading the risk to the broker is higher.

There is likely to be more faith with clients who hold a higher-level account, so superior margins and leverage will be available. In short, the more prestigious your account type with the broker, the better your ratio of leverage to margin will be.

Trading without margin

When you trade without margin, all transactions must be made with either available cash or long positions. So whenever you buy a position without margin, you must deposit the cash required to settle the trade, or sell an existing position on the same trading day.

In other words, cash proceeds must be available to settle the buy order directly – it’s a straightforward approach but somewhat limited.

The pros of trading without margin are as follows:

1. Less risk: margin trading can lead to greater profits, but it can also cause greater losses. Trading without margin exposes you to less risk, and although the potential profits are smaller, with a good strategy you can make healthy gains.

2. Less stress: having larger positions open can be extremely stressful and sometimes causes people to make poor decisions. The fluctuations will look much bigger with margin trading, while smaller positions without margin will feel safer, more secure, and ultimately less stressful.

3. No margin calls: A margin call is the nightmare of anyone trading on margin. When you trade without margin, there is no risk of this occurring, giving you peace of mind and helping you feel more in control of your own destiny.

The primary benefit of trading without margin is the decreased risk. There are many benefits to trading with lower risk, not least of which being your own peace of mind.

If stress and anxiety are problems for you, and taking a big financial hit would be very damaging to your life, then you may be better off trading without margin.

The cons of trading without margin are:

1. Less buying power: the most obvious disadvantage of trading without margin is that you will be able to control less currency, and thus your buying power is far lower. By borrowing from your broker, you can control significantly larger positions and boost your potential profits by a huge amount.

2. Less flexibility: by having less capital at your disposal, you will have less flexibility to quickly build a portfolio. If your account only enables you to take up 1 position at a time, it’s going to take a long time and a lot of work to build up a portfolio. Trading on margin opens up more doors, giving you the flexibility you need to diversify your trading instruments.

3. Limited account growth: before margin came into the equation, small traders found it difficult to grow their accounts rapidly. By being limited to your account balance, you will probably have to focus on slow and steady growth over a long period, whereas trading on margin gives you the power to grow at an exponential rate with a relatively small investment from your own funds.

4. More personal capital required: without leverage from your broker, you are going to need to invest more of your own money to see the profits you need to grow and sustain your career as an investor. The margin required by brokers can be very small, giving you access to a large fund that you can use to grow and secure your trading future.

Though the risks are greater, the potential gains associated with trading on margin are what makes it a good choice for many investors. Trading without margin is restrictive, and though you can make a success of it, you will likely be in for a much slower and longer journey to where you want to be.

Both methods are valid ways of building your investment portfolio, but it’s down to you to judge which is a better fit for you.

Margin calculator

One of the most important things to do when weighing up whether to trade with or without margin is to understand how much leverage will be available for a given margin.

Busy traders need to get a clear picture of what’s available as quickly as possible.

XM offer a great margin calculator across all currencies and forex pairs, use it here

In order to work out your capital requirements ahead of time, here is the formula:

(exchange rate * unit per pip) * leverage

The exchange rate is the whole number, with no decimals. The unit per pip is the amount you want to risk / make on each pip of the exchange rate movement. Leverage is the ratio that brokers will offer to you – but here we need to convert it to a percentage, or decimal. So 1:10 would become 0.10, 1:30 wold become 0.033 and 1:200 would become 0.005 (as examples).

Let us look at a full example.

We will trade GBPAUD for £1 a point (pip). We will say the rate is 1.9350. The leverage will be 1:20

So you would need £967.5 in your trading account to open this position.

Let’s tweak some number and see what changes. Firstly, let’s be bold and risk £5 per point. Secondly, lets use a broker that offer 1:200 leverage:

Now you need just £96.75 to open this position – even though the trade is 5 times as big at £5 per point.

The first part of the calculation is your overall exposure – the amount of currency you are buying in effect. Here is one last example:

Here we are trading BTCGBP – bitcoin – again, £1 a point, this time with leverage of 1:2 (this is the level most EU brokers will offer on crypto currency). We will say the exchange rate is 9650:

So here, we need to put down far more capital than a major forex pair. This reflects the volatility and risk the broker is taking, effectively lending money on this asset.

We have used GBP in the examples, but the same formula and calculation applies whether trading EUR, USD or any other currency.

Margin call

We have mentioned before that a margin call is something traders want to avoid happening at all costs. Let’s take an in-depth look at what it means and why you don’t want it to happen.

Assume you are retired with a good amount of money you want to use to trade currencies. You open an account with a broker and deposit £10,000.

When you log in, that £10,000 appears in the equity column in your account information.

You see that there are also columns for used and usable margin – the amount under usable margin is always equal to your equity minus the used margin. Equity, rather than balance, is used to determine your usable margin, and it will also determine whether or not a margin call occurs.

Simply put, as long as you keep your equity higher than your used margin, a margin call will not occur. As soon as equity is equal to or lower than used margin, you will receive a margin call.

Imagine your margin requirement is 1%, and you decide to purchase 1 lot of GBP/USD. Your equity will remain at £10,000, and your used margin will now read £100.

Usable margin now stands at £9,900.

If you sell back that 1 lot of GBP/USD at the same price you bought it at, the used margin would return to £0 and usable margin would go back to £10,000.

If, however, you decided to buy a further 79 lots of GBP/USD, totalling 80, your equity will remain the same but your used margin will now be £8,000.

The usable margin will now stand at £2,000. This risky move could yield an enormous profit if GBP/USD rises, but if it falls then you will see your equity fall along with it.

The used margin will remain at £8,000, but as soon as the equity drops below £8,000 you will have a margin call.

This will mean that some or all of your position will be immediately closed at the current market price. This will mean a considerable loss to you, and is the reason why taking big risks is never a sensible approach when trading on margin.

Tickmill margin calculator

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