What is Required Margin?

What is required margin in forex?

When margin is expressed as a specific amount of your account’s currency, this amount is known as the Required Margin.

EACH position you open will have its own Required Margin amount that will need to be “locked up”.

Required Margin is also known as Deposit Margin, Entry Margin, or Initial Margin.

Let’s look at a typical EUR/USD (euro against U.S. dollar) trade. To buy or sell a 100,000 of EUR/USD without leverage would require the trader to put up $100,000 in account funds, the full value of the position.

But with a Margin Requirement of 2%, only $2,000 (the “Required Margin“) of the trader’s funds would be required to open and maintain that $100,000 EUR/USD position.

Example #1: Open a long USD/JPY position

Let’s say you’ve deposited $1,000 in your account and want to go long USD/JPY and want to open 1 mini lot (10,000 units) position.

How much margin will you need to open this position?

Since USD is the base currency. this mini lot is 10,000 dollars, which means the position’s Notional Value is $10,000.

Assuming your trading account is denominated in USD, since the Margin Requirement is 4%, the Required Margin will be $400.

Example #2: Open a long GBP/USD position

Let’s say you’ve deposited $1,000 in your account and want to go long GBP/USD at 1.30000 and want to open 1 mini lot (10,000 units) position.

How much margin will you need to open this position?

Since GBP is the base currency, this mini lot is 10,000 pounds, which means the position’s Notional Value is $13,000.

Assuming your trading account is denominated in USD, since the Margin Requirement is 5%, the Required Margin will be $650.

Example #3: Open a long EUR/AUD position

Let’s say you want to go long EUR/AUD and want to open 1 mini lot (10,000 units) position.

How much margin will you need to open this position?

Assuming your trading account is denominated in USD, you need to first know what the EUR/USD price. Let’s say EUR/USD is trading at 1.15000.

Since EUR is the base currency, this mini lot is 10,000 euros, which means the position’s Notional Value is $11,500.

Since the Margin Requirement is 3%, the Required Margin will be $345.

Learn to Trade Forex

If you’d like to earn extra income trading on the Forex market, consider learning how to currency trade with Forex Smart Trade.   With their super-accurate proprietary trading tools and best-in-the-business, personalized one-on-one training, you’ll be successful.  Check out the Forex Smart Trade webinar.  It shows one of their trader’s trading and how easy, intuitive, and accurate the tools are.  Or try the Forex Smart Trade 14-day introductory trial for just TEN dollars.