What is the Formula Used to Calculate Required Margin?

Formula of How to Calculate Required Margin Level in Indices Trading

Now if Your Stock Leverage is 100:1

When trading if you have $1,000 & use leverage option of 100:1 & buy 1 standard lot for $100,000 your margin on this trade transaction is the $1000 in your account, this is the money which you'll lose if your open trade position moves against you, the other amount $99,000 that's borrowed, stock broker will close the open trades automatically using a Margin Call once your $1,000 has been taken by the trading market.

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

Formula for Calculating What's 20% Margin Requirement Level?

For 20 percent margin requirement before liquidating your stock trades automatically using a Margin Call, then your transactions will be closed once your trade account balance gets to $200 - at $200 you'll get a margin call.

Formula for Calculating What is 50% Margin Requirement Level?

For 50 % prerequisite of this level before closing out your stock trades automatically using a margin call, then your transactions will be closed once your trade account balance gets to $500 - at $500 you'll get a margin call.

Formula for Calculating What is 100% Margin Requirement Level?

If the broker sets 100 Percent margin requirement of this level before automatically closing your open trade transaction positions automatically using what is known as a Margin Call - at $1,000 you'll get a margin call, then your stock trades will be closed once your trade account balance gets to $1,000: Meaning stock trades will close-out as soon as you execute a 1 standard lot on this trading account because even if you pay 1 point spread your account balance will get to below $1,000 & needed margin requirement percentage is 100 Percent i.e. 1,000 dollars, therefore your orders will immediately get closed using a Margin Call once your margin requirement falls below 100 percent.

Most brokers do not set 100 Percent margin requirement, but there are those brokers that set 100 Percent margin aren't suitable for you at all, even those who set their requirement at 50% margin percent level requirement are still not suitable. Select the ones that set 20% margin percentage level requirement, in fact, those brokers that set at 20% Margin Requirement are some of the best because the likelyhood they close out-out your trade using a Margin Call is reduced as pictured in the example above.

To Learn and Know More about Leverage & Margin - How to Read the Topics Below:

• What is Leverage

• Leverage & Margin Example

• Leverage Margin Guide

• What is Money Management

• Indices Money Management Rules

Leverage & Margin Explained