From Wikipedia, the free encyclopedia.

Forex Leverage Calculator

Schultz, R. Schultz, and D. Shuckett, Basic Financial Management Nemmers, Basic Managerial Finance Sherman June Stulz January Journal of Financial Economics. Financial Management and Policy. Fred and Eugene F. Brigham, Managerial Finance Retrieved 16 December Henderson, Jr. June ISBN Merriam-Webster, Inc.

Douglas Harper, Historian. Categories : Financial ratios Debt. Namespaces Article Talk. Views Read Edit View history. Help Learn to edit Community portal Recent changes Upload file. Download as PDF Printable version. Two margin calculation methods are possible for such positions. The calculation method is determined by the broker. Used if "calculate using larger leg" is not specified in the "Hedged margin" field of contract specification. The resulting margin value is calculated as the sum of margins calculated at each step.

Calculation for covered volume. Used if the "Hedged margin" value is specified in a contract specification. In this case margin is charged for hedged, as well as uncovered volume. If the initial margin is specified for a symbol, the hedged margin is specified as an absolute value in monetary terms. If the initial margin is not specified equal to 0 , the contract size is specified in the "Hedged" field. The margin is calculated by the appropriate formula in accordance with the type of the financial instrument, using the specified contract size.

How to Calculate Leverage, Margin, and Pip Values in Forex

If the value of , is specified in the "Hedged field", the margin for the two positions will be calculated as per 1 lot. If you specify 0, no margin is charged for the hedged covered volume. Per each hedged lot of a position, the margin is charged in accordance with the value specified in the "Hedged Margin" field in the contract specification :. Calculation specifics for hedging orders when using fixed margin.

When an order opposite to an existing position is placed, the margin on the hedged volume is always calculated using the "Hedge margin" value. For the non-hedged volume, the "Initial margin" value is used when placing an order, and "Maintenance margin" is applied after the appropriate position is opened.

These calculation specifics only apply for symbols, for which the initial and maintenance margin values are specified calculation type "Fixed margin" or "Futures". A trader has a position Buy 1. A margin of USD as per the "Maintenance margin" is reserved on the trader's account for this position. Used if "calculate using larger leg" is specified in the "Hedged margin" field of contract specification.

Calculate the weighted average Open price for the hedged volume by all positions: 1. Calculate the weighted average Open price for the non-hedged volume by all positions: 1.

Using the Forex Leverage Calculator

The larger leg sell margin ratio is used for the non-hedged volume: 4. Calculate the hedged volume margin using the equation: 2. Calculate the non-hedged volume margin using the equation: 1. The final margin size: Margin Calculation for Retail Forex, Futures The trading platform provides different risk management models, which define the type of pre-trade control. Margin calculation is based on the type of instrument. For Stock Exchange, based on margin discount rates — used for the exchange market. Margin calculation is based on the discounts for instruments. Discounts are set by the broker, however they cannot be lower than the exchange set values.

If the account has no positions and orders for the symbol, the margin is calculated using the formulas below. If the account has an open position, and an order of any type with the volume being less or equal to the current position is placed in the opposite direction, the total margin is equal to the current position's one. If the account has an open position, and an order of any type is placed in the same direction, the total margin is equal to the sum of the current position's and placed order's margins.

If the account has an open position, and an order of any type with the volume exceeding the current position is placed in the opposite direction, two margin values are calculated - for the current position and for the placed order. The final margin is taken according to the highest of the two calculated values.

If the account has two or more oppositely directed market and limit orders, the margin is calculated for each direction Buy and Sell. For all other order types Stop and Stop Limit , the margin is summed up charged for each order. In this mode, a trader leverage is taken into account even if a fixed margin is set. Basic calculation Using the larger leg Used if "calculate using larger leg" is not specified in the "Hedged margin" field of contract specification. The calculation consists of several steps: For uncovered volume For covered volume if hedged margin size is specified For pending orders The resulting margin value is calculated as the sum of margins calculated at each step.

Calculation for uncovered volume Calculation of the total volume of all positions and market orders for each of the legs — buy and sell. Calculation of uncovered volume smaller leg volume is subtracted from the larger one. The calculated volume and weighted average price are used then to calculate margin by the appropriate formula corresponding to the symbol type. When considering a margin ratio , the larger leg ratio buy or sell is used. The weighted average rate value is used when converting from a margin currency to a deposit one.

Calculation for covered volume Used if the "Hedged margin" value is specified in a contract specification. Per each hedged lot of a position, the margin is charged in accordance with the value specified in the "Hedged Margin" field in the contract specification : Calculation of hedged volume for all open positions and market orders uncovered volume is subtracted from the larger leg. The calculated volume, weighted average price and the hedged margin value are used then to calculate margin by the appropriate formula corresponding to the symbol type.

Obviously, the cost of leverage directly depends on the volume of its use. The broker usually charges the commission only for the actual amount of funds used. If you are new to Forex, the ideal start would be to use leverage and 10, USD balance. So, the best leverage for a beginner is definitely not higher than the ratio from 1 to How do you find the best leverage in Forex for you?

Margin Calculation for Retail Forex, Futures

Obviously, the answer to this question will be different for each trader. The table below shows the calculation of the required collateral and deposit change for leverages with a classic lot of , USD. Now we will calculate the maximum size of positions that we can open and the risk per trade, subject to the above rules. In the table above, we see that with such risk management requirements, the optimal leverage on Forex is , since in this case we will be able to open positions at once that meet our risk management rule, or several positions with a minimum risk.

From this example, it is obvious that for trading with a lower leverage, you need to increase your deposit so that you can actively trade with the required level of diversification. You may say that this is a contradiction. How does trading with a large leverage reduce risks? In fact, there is no contradiction. Liquidation risks do go down with higher leverage, provided that trading volumes remain the same. All the disadvantages high leverage I told of above relate to the psychology of a trader and violation of money management rules , which is why it is so important to work on your trading strategy and discipline in trading.

Then the high leverage will not be a problem and will not lead to losing the deposit. From the examples above we concluded that high leverage is okay. If you follow the rules of risk management and have proper trading discipline, high leverage is more of an advantage. There is simply no liquidity provider on the foreign exchange market that would cover leverage of more than So any Forex broker with leverage like , should immediately raise suspicion.

Another sign of an unreliable broker is that you cannot trade directly with a liquidity provider using a raw market spread. Pay attention to customer service as well. Brokers who take care of their clients have a service that works around the clock and answers any requests quickly.

• What is leverage??
• pairs trading strategy!
• Leverage (finance).
• Leverage 1:200 Forex Brokers.
• What is leverage in forex trading?.
• Forex Margin Explained – It All Starts with Equity.
• bollinger bands rules?

Such brokers also provide a personal manager service for large clients and a wide tariff range for each client. If you analyze the broker market, you will surely notice Liteforex. It has many advantages over other brokers:. Using leverage, one can drastically reduce the amount of capital required. Considering that you entered with a full lot, the price has to go only points in 5-digit representation from the point of entry in the "wrong" direction for your trade to be closed by Stop Out.

As you understand, this is a colossal risk. As we have seen, the best leverage ratio on Forex is a relative term. In addition, this tool must be used with care. Using too high a leverage can either bring incredible profits or ruin the trader. The best leverage for Forex trading depends on the capital at the trader's disposal.

It is believed that a ratio of to is the best leverage for Forex.

What is a Good Leverage Ratio for Forex? - Forex Education

In this case, a trader can get tangible benefits from margin trading, provided correct risk management. At the same time, it is vitally important to follow your own risk management rules, not to abuse free margin and always keep a reserve of funds for potential closing of all open positions by stop loss in order to avoid early liquidation of active trades. Best leverage in forex trading depends on the capital owned by the trader.

It is agreed that to is the best forex leverage ratio. So leverage is the best leverage to be used in forex trading.

Leverage is solely a trader's choice. Most professional traders use the ratio as a balance between trading risk and buying power. If you are a novice trader and are just starting to trade on the exchange, try using a low leverage first or While doing so, always remember about the risk management system. Follow its rules! The average starting balance for a Forex trader is higher.

Open more than one position with caution.

• XM Margin Calculator!
• Best Leverage for Forex Trading: What Ratio is Good for Newbies & Pros | LiteForex.
• What is a Good Leverage Ratio for Forex?.
• Leverage and margin in forex.
• What is Leverage in Forex!
• stock options insurance!
• Leveraged Equity.

This is enough to start if you trade with the minimum lot and limit yourself to 5 open orders. In this case, liquidation risks are minimal, but for most traders this trading method remains inaccessible.