Trade Stock Indices

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How to Calculate Margin

Margin is the amount of money required by your indices broker so as to allow you to continue trading with the borrowed amount in your stock indexes trading account.


In other words the question what is margin in Indices Trading? can be explained as the money required to cover open stock indexes trades and is expressed in percentage. For 100:1, the amount you will control is 100,000 dollars if your indices trading account capital is $1,000.


Now can you compare someone investing $1,000 with another one investing $100,000? Obviously Not. This is how it works, it takes you from that guy investing $1,000 to that one investing $100,000. Where does this extra money come from? You borrow from your indices broker in what is simply known as Indices Trading Leverage. This money that you borrow, you borrow it against the $1,000 dollar of your own that you deposit with your indices broker when you open a stock indexes trading account. If you were to explain what this means - then it is the ability to control a large amount of money using very little of your own money and borrowing the rest. Otherwise, if you were trade Indices Trading without this indices trading leverage it would not be as profitable as it is, in fact you can still choose not to use stock indexes trading leverage, using the 1:1 stock indices leverage option but you would not make money it would take too long to make any profit in stock indexes trading.


Example of how to calculate Margin:

Indices Trading Margin required in this case is 1,000 dollars (your money) if it is expressed as a percent of 100,000 dollars which you control it is:


If leveraging = 100:1

1,000 / 100,000 * 100= 1%

Indices Trading Margin required = 1%

(1/100 *100= 1%)


How to Calculate Margin - What is Margin?

 

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