Foreign exchange, or forex, is one of the largest traded commodities within the planet. This is primarily because any nation that issues currency can feasibly market in the forex market. It is also anticipated to forex margin. Unlike margin for store accounts, due to the liquidity of the forex marketplace, brokers give forex traders very much higher margin limits. For instance, it is not unusual with a broker to produce some trader along with margin about 200 to 1. This means that to each $1 invested in the industry, the broker will give you purchasing power of $200.
things you’ll need:
Calculator or spreadsheet
1 Determine the total transaction (notional) value. Let’s say you wish to trade just one “lot.” A good deal is 100,000 units in any currency. To instance, the quote 100,000 EUR (euro) / USD (U.S. dollar) is equivalent to 100,000 euros.
2 Verify the margin qualification. This is the period of cash you are needed to place awake in purchase to make a trade, plus yous referred to as “margin requirement” by way of the forex broker. Let’s assert your broker requires 1 percent of the transaction amount before you can market.
3 Determine the Forex margin. Multiply the margin requirement by the transaction value. The calculation is 100,000 x 0.01 = $1,000.
4 Calculate margin-based leverage. Break down total value of the transaction (notional) from the forex margin. The calculation is: 100,000 / 1,000 = 100:1 or 100 to 1.
Margin-based leverage remains usually expressed like a ratio. The most common ratios are calculated below:
400:1 or 0.25%
200:1 or 0.50%
100:1 or 1.00%
50:1 or 2.00%
Investopedia: Forex Leverage: A Double-Edged Sabre
calculator picture by L. Shat from internet site