The standard leverage for all trading accounts when established is (1-100) and may be changed by request through the client portal.
General Leverage Scale:
Example:
A market order of 35 lots will be filled as follows:
First ten lots requires USD 2000 margin
Second ten lots requires USD 3330 margin
Last ten lots requires USD 10000 margin
Total margin requirement for this transaction is: 2000+3330+10000= USD 15330
Leverage and Margin Explained
What is leverage?
For example, to control a $100,000 position, your broker will set aside $1,000 from your account. Your leverage, which is expressed in ratios, is now 100:1.
You’re now controlling $100,000 with $1,000.
Let’s say the $100,000 investment rises in value to $101,000 or $1,000.
If you had to come up with the entire $100,000 capital yourself, your return would be a tiny 1% ($1,000 gain / $100,000 initial investment).
This is also called 1:1 leverage.
Of course, I think 1:1 leverage is a misleading term because if you must come up with the entire amount you’re trying to control, where is the leverage in that?
Fortunately, you’re not leveraged 1:1, you’re leveraged 100:1.
The broker only had to put aside $1,000 of your money, so your return is a groovy 100% ($1,000 gain / $1,000 initial investment).
Now we want you to do a quick exercise. Calculate what your return would be if you lost $1,000.
If you calculated it the same way we did, which is also called the correct way, you would have ended up with a -1% return using 1:1 leverage and! -100% return using 100:1 leverage.
Leverage and Margin Explained
What is margin?
In forex, to control a $100,000 position, your broker will set aside $1,000 from your account. Your leverage, which is expressed in ratios, is now 100:1. You’re now controlling $100,000 with $1,000.
The $1,000 deposit is “margin” you had to give in order to use leverage.
Margin is the amount of money needed as a “good faith deposit” to open a position with your broker.
It is used by your broker to maintain your position. Your broker basically takes your margin deposit and pools them with everyone else’s margin deposits, and uses this one “super margin deposit” to be able to place trades within the interbank network.
Margin is usually expressed as a percentage of the full amount of the position. For example, most forex brokers say they require 2%, 1%, .5% or .25% margin.
Based on the margin required by your broker, you can calculate the maximum leverage you can wield with your trading account.
If your broker requires 2% margin, you have a leverage of 50:1.
Aside from “margin requirement”, you will probably see other “margin” terms in your trading platform.
There is much confusion about what these different “margins” mean so we will try our best to define each term:
If a margin call occurs, some or all open positions will be closed by the broker at the market price.