How is Margin Level Calculated?

We shall first explain the various trading margin terms used in platforms & then explain how indices margin level is calculated using an example in MetaTrader 4.

Indices Margin, Margin Required, Equity, Used Stock Margin and Free margin

What is Margin Required? : It is amount of money your broker requires from you as a trader to open a trade transaction. It's denoted in percents.

What is Equity? : It is total amount of capital you've in your account.

What is Used Margin? : amount of money in your account which has already been used up when buying a lot, this contract is one that is displayed in open positions. As a trader you can't use this sum of money after opening a trade because you have already used it and it isn't available to you.

In other terms, because your broker has opened up a trade transaction for you using the capital you have borrowed, you must sustain this usable margin for your account as a security to allow you to continue using this leverage he has given you.

What is Free Margin? : amount in your account that you can use to execute new transactions. This is amount of money in your account which has not yet been trading leveraged because you have not yet opened a trade position with this money - this amount is also very important for you as a trader because it enables you as a trader to continue holding your open trade transactions as explained and illustrated below.

Example of How is Margin Level Calculated on MT4?

The margin examples on MetaTrader 4 Platform below, the set stock leverage ratio option is 100:1, the trading margin which is 1 % is $2683.07, therefore the total sum controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest of the amount, with this set at 100:1, trader is using 1% of their capital, this 1 % equals to $2683.07, if 1% equals to $2683.07 then 100% is $268,307

How is Margin Level Calculated? - How is Margin Level Calculated?