MT4 Margin Level: Example of How to Calculate Trading Leverage in MetaTrader 4

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

If trading leverage = 100:1

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

Margin required = 1 %

(1/100 *100= 1%)

'Trade Forex Trading - Please simplify because I am Beginner Trader'

(Simplify - your indices capital is $1,000 after leverage you control $100,000 - $1,000 is what percent of $100,000 - it is 1%) that's your indices margin requirement for your account.

The indices margin example explained and illustrated below, the set stock leverage ratio option is 100:1, the indices 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

MT4 Margin Level: Example of How to Calculate Indices Leverage in MetaTrader 4

• If = 50:1 Leverage - Used Leverage

Then indices margin requirement = 1/50 *100= 2 percent

If you have $1,000,

1,000* 50 = $50,000.

1,000 / 50,000 * 100= 2 percent

(Simplify - your indices capital is $1,000 after leverage you now control $50,000 - $1,000 is what percentage of $50,000 - it is 2 %) that's your indices margin requirement

• If = 20:1 Trading Leverage - Used Leverage

Then the indices margin requirement = 1/20 *100= 5%

If you have $1,000,

1,000* 20 = $20,000.

1,000 / 20,000 * 100= 5 %

(Simplify - your indices capital is $1,000 after leverage you now control $20,000 - $1,000 is what percent of $20,000 - it's 5 %) that is your indices margin requirement

• If = 10:1 Trading Leverage - Used Leverage

Then the indices margin requirement is = 1/10 *100= 10%

If you have $1,000,

1,000* 10 = $10,000.

1,000 / 10,000 * 100= 10 %

(Simplify - your indices capital is $1,000 after leverage you now control $10,000 - $1,000 is what percent of $10,000 - it's 10 percent) that is your indices margin requirement

What's Difference Between Maximum Indices Leverage & Used Leverage?

However, you should note that there is a difference between maximum leverage ( trading leverage given by your broker which is the highest leverage you can trade with if you choose to) & used trading leverage ( trading leverage depending on lots you have opened/open trades). One is the broker's (Maximum Indices Leverage) and the other is trader's (Used Leverage). To explain this indices trading used leverage & maximum leverage concept we shall use trading example above:

If your broker has given you 100:1 Max Indices Leverage, but you only open a trade of $10,000 dollars then Used Leverage is:

$10,000: $1,000 dollars (your money)

10:1

Your have used 10:1 Trading Leverage, but your max leverage is still 100:1 Trading Leverage. This means that even if you are given 100:1 Maximum Indices Leverage or 400:1 Max Indices Leverage, you do not have to use all of it. It is best to keep your used leverage to a maximum of 10:1 but you'll still choose 100:1 maximum leverage option for your account. The extra trading leverage will give you what we call Free Indices Margin, As long as you have some Free margin on your account then your open stock trades will not get closed by your broker because this margin requirement will remain above required level.

When it comes to indices trading one of your rules: money management rules on your trade plan should be to use leverage below 5:1.

In the above MetaTrader 4 trading screenshot example, the trader is using $2683.07, total controlled amount is $268,307, but trading account equity is $16,116.55, therefore used leverage is ( $268,307 divide by 16,116.55 ) = 16.64 : 1

16.64 : 1 Used Leverage

Indices Margin accounts allows traders to control a big amounts of indices trading units using leverage using little of their own capital while borrowing the rest

Obtaining this account will enable you to borrow money from the broker to trade indices lots with.

The amount of borrowing power your account gives you what is called ' leverage', and is usually expressed as a ratio - a ratio of 100:1 leverage means you can control resources worth 100 times your deposit amount.

What this means in Indices terms is that with 1 % margin in your account you can control a trade worth $100,000 with a $1,000 deposit.

However, Trading this margin trading account increases both potential for trade profits as well as losses. In you can never lose more than you deposit, losses are limited to your deposits and usually brokers will close a transaction that extends beyond your deposited amount by executing what is referred to as a margin call. traders must therefore try to keep their margin requirement level above that required. By using indices money management rules & keeping your used leverage below 5:1.