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Leverage & Margin

What is Leverage?

Leverage is the use of funds borrowed from a financial intermediary to increase an investor's trading position beyond what would be available from his or her cash balance. Investors often use leverage to take advantage of relatively small price changes in currency pairs, metals, and stocks. Leverage can magnify Both profits and losses.

For example, if you’re trading with a 1:200 leverage, and you have $1,000 USD in your account, you’ve got $200,000 available for trading. Although this sounds like an insanely good opportunity, you must always remember that it’s a double-edged sword.

What is Margin?

It may be easier to understand if you think of the margin as a deposit for the trade that you want to open and maintain. The broker that you’re trading with will keep a portion of your balance to cover the potential loss of that trade. Once you close the position, the margin will be put back into your account.

The margin that you need for a trade is normally expressed as a percentage of the whole trade and is called the ‘Margin requirement’. You’ll be given a margin requirement for every trade that you open, and it will vary depending on the instrument that you trade and the broker that you choose to trade with.

How do you calculate the margin requirement?

Well, the required margin will be a percentage of the size of the trade that you want to open and is calculated according to the base currency of the pair that you want to trade. Using the equation below you can work out how much margin you’ll need for each trade.
Required Margin = Position Size X Margin Requirement
For example:
You’d like to open a mini lot (10,000 base units) in USDJPY. How much margin do you need to open the position?

As the USD is the base currency, the position size (or notional value) is 10,000 USD. Your broker has given you a Margin Requirement of 5%

Margin Calculator

Required Margin :

What is Stop Out Level?

In Forex trading, a Stop Out Level is when your Margin Level falls to a specific percentage (%) level in which one or all of your open positions are closed automatically (liquidated) by your broker. This liquidation happens because your trading account can no longer support the open positions due to a lack of margin. More specifically, the Stop Out Level is when the Equity is lower than a specific percentage of your Used Margin. If this level is reached, OXShare will automatically start closing out your trades starting with the most unprofitable one until your Margin Level is back above the Stop Out Level.

Example: Stop Out Level at 40%

This means that your trading platform will automatically close your position if your Margin Level reaches 40%.

Suppose you bought EURUSD, and the market started falling against you.

Balance: $1,000

Used Margin: $200

Equity = Balance + Floating P/L

When your equity is equal to $80 (40% stopout multiplied by the used margin), then your stopout will be triggered and your position will be closed out.


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EURUSD1.2184 1.2186

GBPUSD1.4167 1.4169

USDJPY109.35 109.38

USDCAD1.2101 1.2103

 
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OXShare.com is owned and operated within the OXShare Group of companies. OXShare consists of OXShare FSA LTD, regulated International Financial Services (license oxshare LTD 1654 CTD 2022) , 

Clients must be at least 18 years old to use the services of OXShare.

High Risk Warning: Trading Contracts for Difference (CFDs) on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade Contracts for Difference (CFDs), you should carefully consider your trading objectives, level of experience and risk appetite. It is possible for you to sustain losses that exceed your invested capital and therefore you should not deposit money that you cannot afford to lose. Please ensure you fully understand the risks and take appropriate care to manage your risk.

You are strongly advised to obtain independent financial, legal and tax advice before proceeding with any currency or spot metals trade. Nothing in this site should be read or construed as constituting advice on the part of OXShare or any of its affiliates, directors, officers or employees.