What is Margin?
Simply put, margin is the amount of funds you are required to deposit in advance before opening a trade, serving as collateral to fulfill obligations or cover potential risk.
In financial trading (such as forex, precious metals, CFDs, etc.):
Margin = The deposit required to open a position
In leveraged trading, you do not need to pay the full contract value. Instead, you only need to deposit a certain percentage as margin to control a larger trading position.
How Margin is Calculated
Currency Pairs
- Indirect Quote Currency Pairs (e.g., USDJPY)
Calculation Formula:
Margin = Contract Size × Lot Size ÷ Leverage - Direct Quote Currency Pairs (e.g., EURUSD)
Calculation Formula:
Margin = Contract Size × Lot Size × Current Price ÷ Leverage - Cross Currency Pairs (e.g., AUDCHF)
If USD is quoted second:
Margin = Contract Size × Lot Size × Base Currency USD Rate ÷ Leverage
If USD is quoted first:
Margin = Contract Size × Lot Size ÷ Base Currency USD Rate ÷ Leverage
Index
- If the margin currency is USD:
Margin = Contract Size × Lot Size × Current Price ÷ Leverage - If the margin currency is another currency:
- If USD is quoted second:
Margin = Contract Size × Lot Size × Current Price ÷ Leverage × USD Exchange Rate - If USD is quoted first:
Margin = Contract Size × Lot Size × Current Price ÷ Leverage ÷ USD Exchange Rate
- If USD is quoted second:
Why Are the Calculation Methods Different?
In forex trading, the currency on the left is the “Base Currency”, while the currency on the right is the “Quote Currency.”
The margin calculation varies depending on the currency pair being traded and its quotation format (whether USD appears first or second).
Therefore, the system will automatically calculate the required margin based on your account’s base currency and the trading instrument.