Margin, Leverage and Margin Call (Part 1)

In another article already discussed about Pip, Lot and Calculation of Profit / Loss. Now the article titled "Margin, Leverage and Margin Call (Part 1)" will discuss more about calculating Margin, Leverage and also the definition and calculation of Margin Call.

Margin Calculation

First, to understand the margin, we must understand the calculation Lot. As already discussed that generally 1 lot = quantity contract size $ 100,000 and 0.1 lot size quantity contract = $ 10,000. Or you can ask questions directly to the broker in question because the type of account also affect the amount of the contract value for the size of 1 lot.

For the currency pair prefix / USD for example is based USD / JPY , USD / CHF , and so forth , the margin calculation is as follows :
Margin = Total Lot x 100,000 x % margin ( for wearing unit Lot )
or Margin = Quantity Contract Size x % margin ( for units using Quantity )

Example 1 : We did get open in the USD / JPY 1 lot with 1:100 leverage , margin calculation is as follows : Margin = 1 x 100,000 x 1 % = $ 1,000
Example 2 : We conducted an open sell on the USD / CHF as much as 0.3 lots with the leverage 1:200 , margin calculation is : Margin = 0.3 x 100,000 x 0.5 % = $ 150

As for the currency pair quote / suffix is USD for example EUR / USD , GBP / USD , and so forth , then , the margin calculation is : Margin = Total Lot x 100,000 x % margin x price quote ( for wearing unit Lot ) or margin = Quantity Contract Size x % margin x price quote ( for a unit using Quantity )

Example 1 : We do order buy ( Ask) in currency EUR / USD 1 lot with 1:100 leverage and exchange rates Bid / Ask when it is 1.2998/1.3000 then ,
margin calculation is: Margin = 1 x 100,000 x 1 % x 1.3000 = $ 1,300
Example 2 : We do a sell order ( bid ) in the GBP / USD as much as 0.2 lots with the leverage 1:500 and exchange rates Bid / Ask when it is 1.9010/1.9014 then ,
margin calculation is: Margin = 0.2 x 100,000 x 0.2 % x 1.9010 = $ 76

This article is continued in the subsequent discussion .

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