What Is A Forex Margin?

The forex margin is calculated in the form of percentage and is known as the amount you use to open up new positions while making use of leverage.

Your margin account is not any fees which is charged to your account, on the contrary it ensures that there is sufficient balance in your account, which is required relative to your position size. The margin amount that any trader will need to have in their account is dependent upon the types of instruments they are trading, as well as their position size. If you want to know what forex margin you need to have as a trader, ForexRay can help you out, giving you great opportunities for exploring trade in the market.

An Example Explaining Idea of Margin Trade

To explain the idea of forex margin, take a currency pair of NZD/USD and take the exchange rate to be 0.69.

As a trader, you make a trading decision to sell around $200,000, of NZD/USD at 0.69. Also, as a part of the trading routine, you decide to do the trading with a carefully chosen leverage ratio that is 50:1.

Therefore, as per the calculations and requirements of the forex margin and trading in the industry, the initial deposit you will need to make to do trade in the market will be $200,000/50: $4000.

It is important to note that the margin amount will need to be converted into a dollar amount in all currency pair cases, so that a trader will have a better idea about the risk that it reflects.

The next step is to, take NZD 4,000* 0.69. This will equal to $2760.

The above calculations explain that the initial amount of forex margin that a trader will need to trade a currency pair of NZD/USD, will need to be NZD $4,000 or USD $2,760.

A word of advice to all traders from us, is to note that the margin amount is actually marked to the market, within real time. This is done for life of trade, that is just part of normal procedure in any market dealing with retail forex.

It is also necessary to know that the margin requirements are highly likely to fluctuate along with the variations noted in the forex market. With the rise and dip in the exchange rate, the margin rate requirement will also change.   

Closing Out Of Margin 

ForexRay is focused on effective risk management so that our clients don’t have to suffer any large losses. Our margin close out policy lets any trader limit the amount of loss they want to risk with any trade. The system has been designed to make sure that as soon as your forex margin level falls below your limit, our sophisticated systems will shut down the positions automatically.

This will make sure that it is stopped at the best possible price available, before you start incurring huge losses. It is essential to note that at times of high volatility in the market, the prices may display a gap which will in turn affect prices at which all the positions might be required to be closed.

  • You can view your margin level indicator by logging into our trading platform. It represents the coverage level which is linked to the open positions. You will have to view 3 types of scenarios,
  •  With a margin indicator level higher than 200%, the indicator will show the sign of ˃200, which is translated into you having double the funds required to ensure positions remain open.
  •  With a margin below 200%, you will get a set percentage which lies between 100 and 200, and this will depend on the noted ratio.
  •  With a forex margin rate below or at the close out level, it signifies that you don’t have suitable funds you will get a warning symbol indicating the fall of the margin rate below the closing level. 
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