How to Calculate Forex Leverage and Margin

What is Leverage?

Leverage is having the ability to control a large amount of money using very little of your own money and borrowing the rest.

Example:

Your Forex broker gives you leverage of 100:1

This means you borrow 100 dollars for every dollar you have in your trading account.

To put in another way your Forex broker gives you 100 dollars for every dollar in your trading account.

This means if you open a Forex trading account with 1000 dollars then your Forex broker gives you 100 dollars for every 1 dollar you have, the total amount you will control is:

If for 1 dollar the broker gives you 100

Then if you have 1000 the broker will give you a total of:

1000 dollars * 100 = 100,000 dollars

Now you control 100,000 dollars

What is Margin?

Margin is the amount of money required by your Forex broker so as to allow you to continue trading with the leveraged amount.

In the above case our margin is 1000 dollars

In other word this is the margin required and expressed in percentage

Margin required in this case is 1000 dollars (your money) if it is expressed as a percent of 100,000 dollars which you control it is:

1000 / 100000 * 100= 1%

Margin required = 1%

Or simplified if leverage = 100:1

Then margin requirement = 1/100 *100= 1%

• If leverage = 50:1

Then margin requirement = 1/50 *100= 2%

If your leverage is 50:1

Then your leveraged account if you have 1000 dollars is

1000* 50 = 50,000 dollars.

• If leverage = 20:1

Then margin requirement = 1/20 *100= 5%

If your leverage is 20:1

Then your leveraged account if you have 1000 dollars is

1000* 20 = 20,000 dollars.

• If leverage = 10:1

Then margin requirement = 1/10 *100= 10%

If your leverage is 10:1

Then your leveraged trading account if you have 1000 dollars is

1000* 10 = 10,000 dollars.