Calculating Margin: Basics for Forex Users

You can’t ignore margin while trading on Forex. It is the “deposit” we all need for position opening. Usually, it is presented as the percent of the full position you see. To avoid headaches calculating numbers on your own, use the Forex margin calculator, a helpful tool for every trader.

Importance of Margin Calculations

You have to use margin calculators in your Forex trading to secure the position. While you can’t consider it as a fee, you may think of margin as basic insurance for your account and your actions on the market. The margin always depends on the amount you trade. You can’t put less, and you can’t put too much.

If your trades do not work, you risk losing everything with a big margin. Hence, it is crucial to name the right margin. You can learn the basic formula for margins and calculate it on your own. However, if you are worried about missing the numbers or miscalculations, it is better to use an advanced calculator.

The formula you may need to calculate the basic margin requirement for the major currency: Margin = ([{Base Currency} ÷ {Account Currency}] Units) / Leverage.

Rewards of Margin

If you decide to trade on margin, you have to know about all the benefits you receive. There are also the risks you have to deal with, so you need to consider everything. Rewards:

  • You can receive a bigger profit than while using the basic account;
  • Better account value in a shorter time period;
  • Experienced Forex users use margin for their benefit since it helps them to make more decisions in no time, using trades’ evaluation;
  • You may choose different opportunities for investments since the capital that is involved in margin trading is less personal.

Risks

Don’t forget to consider even the downfalls of the system before you make a decision. Compare all pros and cons. The main risks are:

  • Such trading is always at high risk since your account can meet serious losses with the large trading volume. If you want to win big prepare to lose big as well;
  • Since there are high chances to lose big, traders usually experience more stress than others because of the specifics of trading;
  • You may become the subject of the margin call. If there is a problem with the open position you have and you are losing, you may get forced to sell more holdings or deposit more money.

To lessen risks, you have to prepare yourself for different situations. Think about your actions in stressful situations and how to avoid them. It is better to have basic skills in advance before you decide to try margin trading.

A Tool That Brings Money

Margin trading has high risks but it offers unique gaining opportunities. If you need to build a strong reputation on the market and increase the trust in your actions, you have to learn everything about margin trading. Calculate your margin, think about the advantages and disadvantages of these actions, and start earning money. If you have tried these recommendations, share your thoughts in the comments below.

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