What is the Formula Used to Calculate Margin?
The following indices trading terms are used in the formula of how to calculate indices trading margin.
Indices Margin, Margin Required, Equity, Used Indices Margin and Free Indices Trading Margin
What's Margin Required? : It is amount of money your indices broker requires from you to open a position. It is expressed in percents.
What is Equity? : It is the total amount of capital you have in your stock indices trading account.
What is Used Indices Trading Margin? : amount of money in your stock indices account that has already been used up when buying a indices lot, this contract is one that is displayed in open positions. As a trader you cannot use this amount of money after opening a indices trade because you have already used it to open another trade and it is not available to you.
In other words, because your indices broker has opened up a position for you using the capital you've borrowed, you must maintain this usable margin for your trading account as a security to allow you to continue using this indices trading leverage he has given you.
What is Free Indices Trading Margin? : amount in your stock indices trading account that you can use to open new trades. This is amount of money in your account which hasn't yet been indices trading leveraged because you have not yet opened a transaction with this money - this is also very important for you as a trader because it enables you as a trader to continue holding your open stock indices trades as will be described below.
Example of Formula for How to Calculate Indices Margin in MT4
The indices margin examples on MetaTrader 4 indices Platform below, the set stock index trading leverage is 100 : 1, the indices trading margin which is 1% is $2683.07, therefore the total amount controlled by indices trader is: $268,307 - this is because with this leverage the trader has used little of his money and borrowed the rest, with this set at 100:1, trader is using 1% of their trading capital, this 1% equals to $2683.07, if 1% equals to $2683.07 then 100% is $268,307
What is the Formula Used to Calculate Margin?
Indices Margin - $2683.07
Indices Trading Margin used to open trades on MT4 example above
This indices trading Margin is 1% of the trade opened on MetaTrader 4 platform
To Learn & Know More about Indices Trading Leverage & Margin - How to Read the Topics Below:
Stock Indices Leverage and Margin Explained
