How to Calculate Margin in Indices Trading
Now if Your Indices Trading Leverage is 100:1
When indices trading if you have $1,000 and use option 100:1 and buy 1 standard lot for $100,000 your margin on this indices trading transaction is the $1000 dollars in your stock indices trading account, this margin is the money that you will lose is your open transaction goes against you the other $99,000 that is borrowed, they will close the open indices trading transactions automatically once your $1,000 has been taken by the stock indices trading market.
But this is if your indices broker has set 0% Indices Trading Margin Requirement before closing your stock indices trades automatically.
For 20% requirement before closing your stock indices trades automatically, then your indices trading transactions will be closed once your balance gets to $200
For 50% requirement of this level before closing your stock indices trades automatically, then your indices trading transactions will be closed once your balance gets to $500
If they set 100% requirement of this level before closing your open positions automatically, then your indices trade will be closed once your balance gets to $1,000: Meaning the trade will close out as soon as you execute it because even if you pay 1 pip spread your account balance will get to $990 and the needed percentage is 100% i.e. 1,000 dollars, therefore your orders will immediately get closed.
Most indices brokers do not set 100% requirement, but there are those that set 100% or 50% are not suitable for you at all, choose those set 20% margin requirements, in fact, those that set at 20% are some of the best because the likely hood they close out your open indices trade is reduced as shown in the examples below.
To know about this margin level which is calculated by your MetaTrader 4 stock indices trading platform automatically - The MT4 Indices Trading Platform will display this as "Indices Trading Margin Requirement", This will be displayed as a percentage the higher the margin percentage the less likely your trades are to get closed.
For Example if - for a indices broker requiring 20% margin requirement
Using 100:1 leverage
If stock indices leverage is 100:1 and you transact 1 Mini Lot, equal to $10,000
$10,000 dollars(mini lot) divide by 100:1, your used capital is $100
Calculation:
= Capital Used * Percentage(100)
= $1,000/$100 * Percentage(100)
Indices Trading Margin Requirement = 1,000 %
Investor has 980% above the indices trading margin required amount
Using 10:1
If stock indices leverage is 10:1 and you transact 1 Mini Lot, equal to $10,000
$10,000 dollars(mini lot) divide by 10:1, your used capital is $1000
Calculation:
= Capital Used * Percentage(100)
= $1,000/$1000 * Percentage(100)
Indices Trading Margin Requirement = 100 %
Investor has 80% above the indices trading margin required amount
The margin trading example explained and illustrated below, the set stock indices leverage is 100:1, the indices trading margin which is 1% is $2683.07, therefore the total amount controlled by the indices trader is: $268,307 - this is because with this indices trading leverage the indices trader has used little of his money and borrowed the rest, with this set at 100:1, the indices trader is using 1 % of their capital, this 1% is $2683.07, if 1% is $2683.07 then 100% is $268,307
How to Calculate Margin in Indices Trading - How to Calculate Indices Trading Margin Requirement in Indices
