Margin Calculation

Hi,

I'm noob in the forex market, and therefore have noob question...
I'm currently toying around with MT4, and I'm not sure I'm following the way it calculates the margin.
I've opened a position, and tried to understand what all the figures mean. Attached is the margin data in MT4.
Could someone please explain me what exactly is Margin, Free Margin and Margin level, and when will I get a margin call?

Thanks!

i'll explain all the figures in the picture you attached just for reference:


Balance: this is what your account looks like with all trades closed out. this does not include open trades. this is not the number to go by when you talk about your account, run reports, etc. it's not very accurate unless you have no open trades, which at that point your equity and balance would be the same.

Equity:this is what your account looks like including open trades. this is the number you should look at when talking about your account or whatever. this is the most accurate number because it includes ALL trades.

Margin: the money that you put down in order to open a trade. think of it as the "safety deposit" that you put down to rent a seadoo or a motorcycle or whatever. when you open a trade for one lot, depending on your leverage, you have to put down a certain amount of money. for 100:1 leverage the margin is 1000 dollars for every lot. looking at your account, you are using a mini lot so for every mini lot you have open (.1 lots) you have to put down 100 dollars. Margin is a two edged sword. it can help and it can hurt. for your account, it's hurting. using margin you can use higher leverage which means you can control a larger amount of money, but you can also lose a massive amount of money. you also need to know about something called a "margin call" right now, you have 676.25 dollars in margin. once your account equity drops below 676.25 dollars, your broker will close out all of your trades to make sure you dont lose your margin. you do NOT want to get a margin call. sure, youll still have that $676, but youll have lost close to 3000.

Free Margin: the amount of margin you will be able to use. you are using $676.25 worth of margin at the moment. right now, you can only open 1069.55 dollars worth of margin without getting a margin call. this is 1.07 lots. so now you can only open 1.07 lots worth of trades. this is not a good position to be in. a quick thing to note, if your equity is greater than your balance, you'll have more free margin to work with. if equity is below balance, you'll have less free margin to work with.

Margin Level:this is your equity divided by your margin times 100 to make it a percent. this is pretty useless. it's just another pretty ratio. the main things you need to worry about are margin and free margin.

i really hope this helps dude.

Thanks, that is a really good explanation.
This is exactly what I've been looking for.

Thanks!

no problem

from looks of your account data you have over extended your account.

Some think that it is risky to let your account get below 1000% margin level.


you are at 258%

ouch

Fiddling around with a spreadsheet and got to the value of the margin used per 100,000 lot for NZDUSD and got a surprise. Four different brokers and four different values. I am pretty sure the leverage with all accounts is 100:1, and the pips are all $10. (MB Trading I traded 10 lots to get the same value.) here they are:

MBT747.16
fxlite748.50
axis odl812.00
interbank 1000.00

(Been through all the pairs of IB and they charge the same for all pairs-$1,000)

(MBT have a different value for each pair in their basket(these values are for 10 mini lots);USD/...$1,000;EUR/...$1493; GBP/...$1626; AUD/...$921; NZD/...$747; CAD/...$965; CHF/...$985)

(FXLITE have similar values for 1 standard lot as MBT for mini lots)- USD/...$1,000; EUR/....$1494; GBP/...1628; AUD/...$921; NZD/...$747; CAD/...$966; CHF/...$986)

AXIS ODL have the following values: USD/... $1085; EUR/...$1620; GBP/...$1764; AUD/...$1,000; NZD/...$811; CAD/...$1046; CHF/...$1070.

Anyone have a rational for this difference? is it just the different policies with the different banks they deal with? From the look of the Interbank margin amounts (the same for all pairs), it seems it is just an inhouse thing; although the others seem to be working to a benchmark value. It cannot be pip value because both AUDUSD AND NZDUSD are both $10 a pip, but their margin used value is different.

Margin Calculation: Thread - anyone need help? #Post 513 - http://www.forexfactory.com/showthre...25#post8896625