Required Margin

Required Margin or Margin Requirement is amount (margin) used to open an order position.

When trading forex One thing every trader can’t avoid is margin, which is a certain amount of money that must be placed as collateral to open an order. For example, if you want to buy a currency pair. USD/CAD at full $100,000 contract value, you don’t have to deposit the full amount. You may only have $1,000 to open an order for USD/CAD with a contract value of $100,000. This $1,000 is the amount (margin) used to open the order.

Margin is not a fee or transaction fee of any kind. It’s just the money that the broker stipulates that must be placed as a minimum collateral (more or less depending on the full value of the contract), in order to allow open orders. Margin is set as a percentage of the full value of the contract size. This depends on the currency pair or trading product to set the margin percentage. This can range from 0.25%, 0.5%, 1% to 10% or more. Moreover, the margin requirement is more or less depending on the Order volume (Position Size) and leverage that investors choose to use as well.

For calculating the margin used to open an order, it is as follows:

Require Margin = {[(Base Currency) / (Account Currency)] x Units} / Leverage

For example, you want to open an order of 0.1 Lot GBP/AUD pair with USD trading account currency and 1:100 leverage with GBP/USD pair exchange rate at the time of opening = 1.30967
How much margin is required to open an order?

From the question, the following information is obtained:
Base Currency = GBP , Quote Currency = AUD , Account Currency = USD , 0.1 Lot = 10,000 Units, Leverage = 100

From the equation,
Require Margin = {[(GBP) / (USD)] x 10,000} / 100 = {[1.30967] x 10,000} / 100 = 130.967$

Therefore, the margin used to open 0.1 lot positions on the GBP/AUD pair after converting to USD trading account currency = 130.967$