Margin is the amount of money you need to open a trade. How it’s calculated depends on the type of leverage you use. Fixed leverage stays the same no matter your account size, while floating leverage changes based on your equity to help manage risk. In this article, we’ll explain both methods and show you simple examples so you can calculate margin easily.
What factors affect margin?
Required margin depends on 3 things:
Trade Size (Lot Size)
In Forex, trades are measured in lots. When you open new trade of any forex instruments you are prompt to select the volume from 0.01 to 100 (maximum volume offered by MH Markets)
Contract Size
This is the quantity of the asset in one lot.
- For currency pairs such as EUR/USD, 1 standard lot = 100,000 units of the base currency.
- For Gold (XAU/USD): 1 lot = 100 ounces.
You can check contract size for the instrument you are trading by checking the Contract Specification page.
Leverage
Leverage reduces the margin you need. Higher leverage = lower margin requirement.
For example, with 100:1 leverage, you only need $1,000 to control $100,000 investment.
Leveraged trading carries a level of risk and may result in losses exceeding your initial investment. Make sure you understand how leverage works by checking our our comparison of fixed and floating leverage.
Margin Calculation with Fixed Leverage
Fixed leverage means your account uses a constant leverage ratio which does not change over time (e.g., 1:100, 1:500). MH Market offers 2 types of leverage: Fixed and floating. You can learn more in the article on the Difference between Fixed and Floating Leverage.
Margin= Number of Lots × Contract Size × Price (if base currency does not match the account currency)Leverage (based on equity)
Not sure the contract size of the instrument you are trading? You can check contract size for all instruments on the Product Specifications page or by opening Product Specification in Meta Trader.
Example of Margin calculation for Currency Pair:
You want to buy 0.23 lots of EURUSD at the price 1.2000. Your account leverage is set to 1:100. To do the calculation you need to check the Contract Size for EURUSD. For forex pair Contract size: 1 lot = 100`000 units.
Margin= 0.23 × 100`000100 = 230 EUR
While calculating margin for currency pairs, the result will be in the pair’s base currency. To determine the exact amount that will be deducted from your trading account, you need to convert this amount into your account currency. Since MH Markets offers USD-denominated accounts, you should multiply the result by the open price to convert it to USD.
230 × 1.2000 = 276
276.
Example of Margin calculation for Gold:
Let's see another example with Gold. Now you want to open 0.1 lots of Gold (XAUUSD) at a price 4281.85 with fixed leverage of 1:100. Contract size for lot of Gold is 100.
Margin= 0.1 × 100 × 4281.85100 = 428.185 USD*
*In Meta Trader, the amount will be rounded to two decimal places, showing as 428.19.
Margin Calculation with Floating Leverage
Floating leverage adjusts based on your real-time account equity and exposure. As your equity or open positions increase, leverage may decrease to reduce risk. Higher equity or larger positions will mean lower leverage applied.
Margin= Number of Lots × Contract Size × PriceLeverage (based on equity)
To calculate floating leverage, you need to check floating leverage Auto Adjustment table.
Example of Margin calculation for Currency Pair:
Let's take the same example: You want to buy 0.23 lots of EURUSD at the price 1.2000. Your account leverage is set to 1:2000. To do the calculation you need to check the Contract Size for EURUSD. Contract size: 1 lot = 100`000 units. And your current Equity is 600 USD.
Based on the floating leverage auto adjustment table, got Gold and forex pairs, if account equity is above 500 and below $1,000, the applied leverage is 1:1000
Margin= 0.23 × 100`000 × 1.20001000=USD 27.6
Let’s continue with the example and assume your account equity is now $1,200. At this level, any new positions in gold or Forex will be opened with 1:500 leverage. Everything else remains the same except your equity, so the applied leverage is lower. This means you’ll need more margin to open the same position.
Margin= 0.23 × 100`000 × 1.2000500=USD 55.2
Example of Margin calculation for Gold:
Let's see another example with Gold. Now you want to open 0.5 lots of Gold (XAUUSD) at a price 4033.2 with fixed leverage of 1:100. Contract size for lot of Gold is 100. And your current Equity is 450 USD.
Margin= 0.5 × 100 × 4`033.2 2000= 100.83 USD
As you can see when calculating the Margin on the account using the floating leverage, leverage decreases, as your equity grows. Always refer to the floating leverage adjustment table and apply the correct formula to determine the margin required for each position. By doing so, you can manage your capital wisely and avoid unexpected margin calls.