What is forex margin?

Margin is the amount of money required to open and maintain a trade. Think of it as a loan from the broker, allowing traders to open larger positions than their account balance would normally allow. Margin acts as collateral and is typically expressed as a percentage of the total position value. Deriv’s forex margin requirements can be found in our trading specifications page.

There are 2 types of margin. Used margin is the amount of capital that is currently being used as security to sustain open positions. Free margin is the remaining amount of capital available to open new positions. For example, if your total account balance is 5,000 USD and used margin is 3,800 USD, you will have 1,200 USD free margin to open new positions.

How to calculate margin in forex

Traders can use Deriv’s forex margin calculator which is based on the formula:

Margin = (Volume x Contract size x Asset price) / Leverage

For example, let’s say you want to trade 3 lots of EUR/USD with an asset price of 1.10 USD and a leverage of 30. You will require a margin rate of 11,000 USD to open the position.

(3 x 100,000 x 1.10) / 30 = $11,000

What is a margin level?

A margin level is a measure of how much of your own money remains in your trading account compared to the amount you've borrowed from your broker for leveraged trading. It's usually expressed as a percentage and calculated as:

Margin level = (Equity / Used margin) × 100

A higher margin level indicates that you have more margin available in your account relative to the borrowed funds, which is generally considered safer. On the other hand, a lower margin level means you're using a larger portion of borrowed funds, which can increase the risk of potential losses.

What is a margin call?

A margin call serves as an alert when your margin drops below 100%, indicating a low level of equity for your trades. In response, traders should take action by either depositing additional funds into their account or closing some of their open trades. Traders can find their margin levels on the Deriv MT5 platform on the Trade tab of the Toolbox.