• Mon. May 20th, 2024

What are the Requirements for Margin ?


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Margin is a portion of your total trading balance that the broker withdraws from your balance in order to receive entry into a particular trade.

A small amount of capital is required when it comes to new entrants to trade. This capital is called margin for entry into the trade. That is, for a new entry, the exact amount the broker will block from your trading balance depends on the margin. Here we are going to discuss all the details about margin and the calculation of margin and its extension.

What are the Requirements for Margin?

You must know that many currencies and brokers in the market are why there is verity in the margin requirement. It is totally dependent on your broker and base currency.

Margin Requirement is expressed as a percentage (%). E.g., 0.30%, 0.5%, 1%, 20%, 50%, 100% or more. These percentages are known as Margin Requirement.

A separate required margin amount is required for each new entry position, and this amount will be blocked by the broker from your trading account balance. Peoples also called it Initial Margin Deposit Margin, or Entry Margin.

Suppose you want to take an entry position of 200,000 units of Major Currency Pair GBP / USD without any leverage. In that case, you will need the required margin of 200,000 for this trade. That is, the amount of Unity is the amount of investment.

But if the amount of margin requirement is 3%, then it means $ 3000, then only margin 3000 required margins will be required to take entry position of the same unit.

Suppose you deposit $ 2000 in a real trading account and accept one mini lot (20,000 units) by GBP / JPY currency pair.

So, if I ask you, what will be the amount of margin to hold this position? What will be the answer from you? Since GBP is the base currency and amounts to mini 20,000 as a mini lot. Now suppose a 4% margin requirement is required to take this position, then the required margin will be $ 800.

Calculation of Required Margin

When you start trading using margin, the amount of margin required to take a new position is displayed as a percentage. This is basically the margin requirement as a percentage of the lot or volume of the entry you want to accept.

Basically, it is calculated based on the base currency of the currency pair.  Suppose the base currency does not match the currency of your trading account (i.e., the currency you specified when opening the account). In that case, the calculation of the required margin calculation will be different.

Let’s learn some of the calculations of margin required. So, if your base currency and trading pair will be the same, your calculation will be, Required Margin = National Value X Margin Requirement.

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