Margin / Leverage
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Maximum Leverage Approximately 100:1*
Customizable Margin Settings Through MyFXCM.com
Up-To-Date Margin Requirements Displayed in the Platform
Never Pay Debit Balance as a Result of Trading |
|
Currency Pair |
Margin Requirement |
EUR/USD
(plus most euro based
pairs) |
$160 |
GBP/USD
(plus most pound based pairs) |
$180 |
USD/JPY
(plus most U.S. based pairs) |
$100 |
AUD/USD
(plus most Australian dollar based pairs) |
$100 |
|
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Note: A full list of up-to-date margin requirements can
be viewed from the MMR column of the "Simple Dealing
Rates" window within the platform.
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Frequently asked questions regarding Margin and Leverage
What is margin?
Margin can be thought of as a good faith deposit required to maintain
open positions. This is not a fee or a transaction cost, it is simply a
portion of your account equity set aside and allocated as a margin
deposit. Margin requirements (per 10K lot) are determined by
taking a percentage of the notional trade size plus a small cushion. A
cushion is added to help alleviate daily/weekly fluctuations.
Why trade on margin?
Trading on Margin (Trading with Leverage*) is a common attraction of the
forex market. It allows you to open trades that are larger than the
capital in your account.
Example
In the example above, $1,000,000 have been purchased through a long USD/JPY position with a $50,000 account balance (20:1* Leverage).
Trading on margin can both positively and negatively affect your
trading experience as both profits and losses can be dramatically
amplified.
What leverage is offer?
Flexible leverage is offered on forex trading accounts. The maximum
amount of leverage available is around 100:1*. The high degree of
available leverage is a popular attraction for many traders to the forex
market, and most traders use the default leverage (determined by
the default margin settings). But the amount of leverage utilized in
your trading is up to you.
Why is lower lower leverage encouraged?
When you use excessive leverage, a few losing trades can quickly offset
many winning trades. To clearly see how this can happen, consider the
following example.
Scenario: Trader A buys 50 lots of USD/JPY while Trader B buys 5 lots
of USD/JPY.
Questions: What happens to Trader A and Trader B account equity when
the USD/JPY price falls 100 pips against them?
Answer: Trader A loses 41.5% and Trader B loses 4.15% of their
account equity.
Example
| |
TRADER A |
TRADER B |
| Account Equity |
$10,000 |
$10,000 |
| Notional Trade Size |
$500,000 (Buys 50, 10K lots) |
$50,000 (Buys 5, 10K lots) |
| Leverage Used |
50:1 (50 times) |
5:1 (5 times) |
| 100 Pip Loss in Dollars |
-$4,150 |
-$415 |
| % Loss of Equity |
41.5% |
4.15% |
| % of Equity Remaining |
58.5% |
95.85% |
By using lower leverage, Trader B drastically reduces the dollar
drawdown of a 100 pip loss.
How can you increase your margin requirements?
The lowest available margin setting (also the default margin setting) is
1% for major currency pairs and 4% for exotic currency pairs. You can
request to increase your margin settings at any time through your
Account Profile at www.myfxcm.com. Simply choose the margin requirement
you desire. (Margin changes can take as long as one business day to be
reflected in your account.)
Where can I view up-to-date margin requirements?
Up-to-date margin requirements are listed by currency pair in the
MMR column of the "Simple Dealing Rates" window within the platform.
* Leverage is a double-edged sword, and can
dramatically amplify your profits. It can also just as dramatically
amplify your losses. Trading foreign exchange with any level of leverage
may not be suitable for all investors.
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