Margin is an amount that you set aside from your trade funds (TFA) to act as a security deposit on the position you want to open. Setting aside funds helps to ensure you have enough equity available to cover potential losses and stops you over-leveraging your account, effectively capping the number of positions you can have open at any one given time.
Once a position is closed the TFA will update to match your total equity minus any used margin and profit or losses on open positions.
Examples of how to calculate margin
Here are 2 examples of how margin is calculated on an Indices and FX trade.
Indices - Germany 40 example:
- You would like to place a 50p a point spread bet on the Germany 40, which is trading at 12000
- The margin required on this market is 5% of the exposure on the trade
- Your exposure on this trade is 50p x 12000 = £6,000
- Therefore, the margin required to cover your position is 5% of £6,000 = £300
Forex - GBPUSD example:
- You would like to place a 50p per pip spread bet on GBPUSD, which is trading at 1.30000
- The margin required on this market is 3.33% of the exposure on the trade
- Your exposure is 50p x £13,000 = £6,500
- Therefore, the margin required to cover your position is 3.33% of £6,500 = £216.45
For TraderPro users, you will see the margin required to cover any position directly on a populated deal ticket.