Margin calculator

How margin is calculated

Margin is the deposit a broker sets aside from your account to hold a leveraged position. It is the notional value of the position divided by the leverage. The notional value is the contract size multiplied by the number of lots multiplied by the price, in the quote currency, and the calculator converts it into your account currency at the reference rate or at the price you enter.

One standard lot of EUR/USD at 1.1600 is 116,000 dollars of notional exposure. At 1:30 the margin is 3,867 dollars; at 1:500 it is 232 dollars. The position's profit and loss per pip is the same at either leverage, which is the point the leverage limits paper makes: leverage decides how much of your account a position ties up, not how much it can lose.

Margin used, free margin and close-out

If you enter an account balance the calculator shows the share of it the position uses and what remains free. Free margin is what absorbs losses on open positions; when equity falls to the broker's close-out level, 50 percent of the required margin under the European and Australian rules and often lower offshore, the broker closes positions. The last line shows the move in pips against you that would take a fresh account from this position to a 50 percent close-out, ignoring spread, which is a useful sanity check on whether the leverage is doing you a favour.

Brokers differ

Leverage depends on the entity that holds your account and on the instrument: majors carry the highest leverage, gold and indices less, and exotics less again. Some brokers raise margin requirements before news and at the weekend. The figure here is the arithmetic at the leverage you type; the broker's specification for the account is the number that applies.