How to Calculate Margin in Indices Trading

Now if Your Stock Leverage is 100:1

When indices trading if you have $1,000 & use leverage option 100:1 & buy 1 standard lot for $100,000 your margin on this trade is the $1000 dollars in your trading account, this margin is the money that you will lose if your open trade transaction moves against you the other $99,000 that is borrowed, they will stop out the open trade transactions automatically once your $1,000 has been taken by trading market.

But this is if your broker has set 0 percent Margin Requirement before closing out your stock trades automatically.

For 20% requisite before stopping out your positions automatically, then your trades will be closed once your balance gets to $200

For 50 percent requisite of this level before stopping out your positions automatically, then your trades will be closed once your balance gets to $500

If they set 100% prerequisite of this level before closing out your open trade positions automatically, then your 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 trading account balance will drop to $990 & the needed percentage is 100% i.e. 1,000 dollars, therefore your orders will immediately get stopped-out.

Most brokers do not set 100% requirement, but there are those who set 100% or 50% are not suitable for you at all, choose those set 20 % margin requirements, in fact, those brokers that set at 20% are some of the best since due to the likely hood they stop out-out your open trade is reduced as displayed in example below.

To know about this margin level which is calculated by your MetaTrader 4 platform automatically - the MetaTrader 4 Software will illustrate this as "Indices Margin Requirement", This will be displayed as a percent the higher the margin percent the less likely your positions are to get closed out.

For Examples if - for a broker requiring 20% margin requirement

Using 100:1 leverage

If leverage is 100:1 & you transact 1 Mini Lot, equals to $10,000

$10,000(mini lot) divide by 100:1, used capital is $100

Calculation:

= Capital Used * Percent(100)

= $1,000/$100 * Percent(100)

Indices Margin Requirement = 1,000 %

Investor has 980% above the margin required amount

Using 10:1

If leverage is 10:1 and you transact 1 Mini Lot, equals to $10,000

$10,000(mini lot) divide by 10:1, used capital is $1000

Calculation:

= Capital Used * Percent(100)

= $1,000/$1000 * Percent(100)

Indices Margin Requirement = 100%

Investor has 80% above the margin required amount

The margin example explained and illustrated below, the set 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 and 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 to Calculate Margin in Indices - How to Calculate Margin Requirement in Indices