How margin is worked out
Margin = lots × contract size × price ÷ leverage. The answer is in the pair’s second currency, dollars for EUR/USD and for gold, and the calculator converts it into your account currency at the day’s reference rate, or at a rate you type. The contract is 100,000 units for forex, 100 ounces for gold and 5,000 ounces for silver.
When the account is in the pair’s first currency, the price does the converting: on a dollar account, 1.00 lot of USD/JPY at 1:30 needs 100,000 ÷ 30 = $3,333.33 at any price.
A worked example
Type these into the calculator to check it by hand. 0.10 lots of EUR/USD at an example price of 1.1000 is 10,000 euros, worth 0.10 × 100,000 × 1.1000 = $11,000. At 1:30 the margin is $11,000 ÷ 30 = $366.67, and at 1:500 it is $22. Gold at an example 4,000.00: 0.10 lots is 10 ounces worth $40,000, so $2,000 of margin at 1:20 and $80 at 1:500.
What margin is, and what it is not
Margin is your own money, set aside while a trade is open and released when it closes. It is not a fee, and it is not the most you can lose. What a trade costs at its stop comes from the stop distance and the lot size, and leverage is in neither: a 30 pip stop on 0.10 lots of EUR/USD costs $30 at 1:30 and $30 at 1:500. What leverage changes follows that through.
Margin answers a different question: whether the account can open the trade, and when the broker steps in. Free margin is equity minus margin, and margin level is equity ÷ margin × 100%. Your broker’s margin call and stop out are set on margin level, and margin call, free margin and margin level walks through a stop out in numbers. Add your balance above and the calculator shows both as they stand right after the trade opens.
Leverage caps on UK and EU retail accounts
For retail clients, ESMA’s product intervention measures, mirrored in the UK by the FCA, cap leverage at 1:30 on major currency pairs and 1:20 on non-major pairs and gold. A pair counts as major when both of its currencies are among the US dollar, euro, yen, pound, Canadian dollar and Swiss franc, so AUD/USD and NZD/USD fall under 1:20. Silver, as a commodity other than gold, is capped at 1:10. The calculator shows the margin at the cap for the market you pick. Accounts outside these rules, and professional accounts, can have 1:500 or more.
Size first, margin last
Choose the money you are willing to lose first, turn it into lots with the lot size calculator, and only then check here that the margin leaves plenty of free margin, counting anything already open.
Questions
How do I calculate margin in forex?
Multiply the lot size by the contract size and the price, then divide by your leverage. 0.10 lots of EUR/USD at 1.1000 with 1:30 leverage: 0.10 × 100,000 × 1.1000 ÷ 30 = $366.67, in dollars because the dollar is the pair’s second currency.
How much margin do I need for 1 lot of gold?
At an example price of 4,000.00, one lot is 100 ounces worth $400,000: $20,000 of margin at 1:20, $4,000 at 1:100 and $800 at 1:500. The margin moves with the gold price, so use the price your platform shows.
Does leverage change my profit or loss?
No. Profit and loss come from the pips and the lot size. Leverage changes the margin, which decides how much the account can open and when the broker closes positions.
Why does my platform show a slightly different margin?
The contract size, the price your broker uses and the rate it converts at can each move the figure a little. The contract size is in the symbol’s Specification in MT5, and the margin of open trades is on the Trade tab of the Toolbox.
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