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Forex Leverage, Margin Requirements & Trade Size

184 ratings | 13368 views
How to calculate viable trade sizes based on the Leverage traded with and the account size
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Text Comments (23)
Lordshandmaiden (2 months ago)
Hi Mindy, good job but when will you have the margin calculator up again on your site? I don't want to do it manually
Mindy Yost (2 months ago)
Just to let you know... The Margin Calculator has been added back on my website!! Cheers, Mindy
Mindy Yost (2 months ago)
The margin calculator that I previously had was a widget from another website that went out of business and closed. I am working on a solution to bring in another one and hope to have one very soon. I miss it also so I know your pain! Cheers, Mindy
Se Taga (4 months ago)
you said that, regardless of if a loss is made or not, the margin requirement is given back? are you sure?
Mindy Yost (4 months ago)
+Se Taga Yes, if I am understanding you correctly. If you have a stop loss on your trade that (if hit) would close your trade for a $300 loss, AND if the broker can in fact close your trade at the exact price point of your Stop Loss Order, then you would only lose $300 on that trade. The $100 that you had "put up" to be in the trade would be returned to your Usable Margin. And this scenario is most typical of what happens.
Se Taga (4 months ago)
+Mindy Yost so say you have a trade on, and the margin requirement is £100 and the your risk on the trade is about £300 and your trade hits your stop loss... You only lose the £300 risk?
Mindy Yost (4 months ago)
Yes, in normal trading conditions, I am sure - you WILL get access again to the Margin Requirement "Deposit" that you put up to be in the trade. But there can be special circumstances where you might not get all of it back - or any of it back - and in very rare circumstances, you may even OWE MORE to the broker after the closure of your trade. The purpose of the Margin Requirement is actually to protect the BROKER - not you. That is why brokers are allowed to decide what leverage they want to offer their clients. Brokers that are willing to take larger risks offer higher leverage (thus lower margin requirements) to their clients. But when you enter a trade - let's say it's a 1 mini lot trade in EUR/USD, you are controlling $10,000 worth of product. If you have put up a margin requirement of $100 (100:1 leverage) to be in that trade, THE BROKER has essentially taken on the responsibility for the other $9,900 if that product lost all of it's value. Now, in forex, no one expects that a currency will lose ALL of its value, and prices move in very tiny increments (1/100th of a penny), so the broker will CLOSE your trade if YOU run out of "Usable Margin" to manage that trade with - because he doesn't want the responsibility of the losses that would fall on his shoulders if the trade continued to lose value. In MOST cases, the broker can close your trade (for your loss) when you run out of usable margin. But sometimes, if the market is moving really fast - or if there is a flash crash or something like that, the price might move right thru the area where you ran out of usable margin. The broker cannot close your trade if there is not tick at that price point, so if the next available tick is much lower, then the broker may have to close your trade at a point where your loss on the trade means that you do not get all of the Margin Requirement back - or in very bad situation, you may not get any of the Margin Requirement back - or even owe the broker even MORE money if your account ends in a debit balance.
Alan (4 months ago)
In the slide demonstrating margin requirements (slide 5-6), you say GBP/NZD has a margin requirement of $559? Shouldn't it be $905.80? ($905.80 x 200 = $181,160)
Alan (4 months ago)
+Mindy Yost Thank you for the reply and updated video. I was going through your videos in order (oldest to newest), so I hadn't seen the updated video at that point. Great videos, by the way - alot of insightful info.
Mindy Yost (4 months ago)
I did this video years ago. The margin requirements change dependent on the price of the pair at the time, and also can be different depending on what currency your account is based in. So with the pair of GBP/NZD - the margin requirement might be quite different if your account currency is USD as opposed to your account currency being in EUR or GBP or NZD or JPY or whatever. It is entirely possible that I made a mistake in the video - or not - I don't know and if I had more time I would fish thru the data to see if that is the case or not - but I don't have time to do that, as I think it is a moot point now anyway because the point of the video is merely to show how differently the margin requirements can be between different pairs. There is an updated version of this video that I did about a year ago with even more information about the intricacies of calculating margin requirements on a specific trade. The link to that updated video is: https://youtu.be/iVpwm-ExKD0 Also - I ALWAYS recommend that you should ALWAYS check with a margin CALCULATOR (preferably with the broker that YOU USE) before you make any trade if you do not have a good idea of what your margin requirement will be!! ALWAYS TRADE SAFE! Hope this helps. Cheers, Mindy
Wayne Filkins (6 months ago)
you're calculator isn't working
Mindy Yost (6 months ago)
Thanks, Wayne for letting me know that the Margin calculator on my site was not working. I will get it replaced with a working calculator as soon as possible. Sorry for the inconvenience. Cheers, Mindy
Ahriveendra Menon (1 year ago)
Hi here is the scenario, account A & B have same equity and were traded exactly like mirror. Now, if I have DD around 12% on account A with leverage 1:1000. What would be the DD in account B with leverage 1:500 ? How do we calculate this.. Real scenario is my current account has 12% DD so far running for almost 4months with monthly 20%-30% profit. It has leverage 1:1000... Now since the equity is doubled broker reduced leverage to 1:500.. so I would like to know what impact it could give me.. please advice
Mindy Yost (10 months ago)
The dollar amount of the draw down would not change. So if your trades were negative 12% of your account balance at one leverage, they would still be 12% of your balance at the new leverage. BUT, you would have TWICE as much held back as margin requirement for your trades at the lower leverage, so you have LESS money in "usable" margin - so be careful!
saifulla saif (1 year ago)
Very educational
Mindy Yost (1 year ago)
I have updated this video with better audio, Here is the link to the new video: https://youtu.be/iVpwm-ExKD0 I think you will like the sound volume much better. Cheers, Mindy
Harold Campbell (1 year ago)
Hi Mindy. Thanks.
Mindy Yost (1 year ago)
That would depend on what pair you are trading, what the margin requirement is for that pair, and what the pip value is for the pair. But here is an example... If you have an account with $2,000USD and you do a 2 Lot trade in GBP/USD the margin requirement would be about $523 so you would have about $1,477 in usable margin, and the pip value would be $20 per pip, so you would be able to go about 70 pips ugly in your trade before you margin call. But that would not be a very smart trade to make. If you want your account to remain viable for very long, the largest trade you should make with a $2,000USD balance would be about a 2 MINI LOT trade. If you want to learn to trade to make consistant profits, I offer mentoring services which you can find listed on my website: MindyYost.com or you can email me for information: [email protected] . Cheers, Mindy
bondasfaq (1 year ago)
If I use 1:500 leverage with an account which has 2000gbp and if I placed a trade of 1.94lot and if market goes against me, how much does the market have to go in a wrong direction for me to lose that 1.92lot?
Breuckelen's Finest (1 year ago)
Great video. You have a new subscriber in me ;-)
Al khalid philips (1 year ago)
thanks for the video
Rob cote (1 year ago)
Thanks you for that video
Mindy Yost (1 year ago)
Thanks for your comment, Rob. I am glad that it helped you understand the subject a bit better. Check out my website: www.mindyyost.com to read more about forex trading. Cheers, Mindy

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