LEVERAGE & MARGIN REQUIREMENTS
A deeper look into your account
UNDERSTANDING LEVERAGE AND MARGIN REQUIREMENTS
Margin and leverage share a dynamic relationship and need to always be taken into account when opening a new trade. They reflect the amount of equity that is required in your account to open and maintain a position and as with all leverage products, understanding the requirements can help you minimise capital risk.
Leverage can best be described as an investment strategy where the client borrows funds to increase the potential return of an investment. In other words, it provides you the opportunity to control a larger amount of money than what you are actually investing.
Margin is the level of funds you need to have in your trading account in order to open and maintain a specific trading position. Calculating and understanding your margin requirements allows you to create an effective risk management.
The margin is a percentage of the size of the trade you want to open, and it is not a fee. It’s simply deducted from your account and returned when the position is closed. The total amount held to maintain all your current open positions is called “used margin”. The remaining balance in your account is available to open new positions.