In leveraged forex trading, margin refers to the monetary collateral necessary to put into positions larger than your real account balance. You can easily leverage the funds in your account in forex trading based on margin requirements for a much higher investing market effect. In a metaphorical sense, “leverage” also refers to the ability to lift a heavy object with little effort.
The lower the margin capital required, the higher the leverage. By leveraging your assets, you can take advantage of tiny market changes to possibly create huge rewards compared to the amount invested if the market goes in your favor. Increasing leverage, on the other hand, raises danger.
Capital Versity Forex Offers Maximum Leverage of 20:1 and considers all monies in the trading account to be margin collateral. A 20:1 account leverage indicates that you can trade up to 20 times your current account balance.
The amount of margin required to maintain any pending orders and open positions is referred to as the required margin. At all times, all open positions and pending new orders must be adequately margined (100 percent).
Capital Versity Forex requires a minimum margin of 5% (or maximum leverage of 20:1) of the currency contract value in HKD.
If you open trade of 1 lot EUR/USD at the exchange rate of 1.40000, the required margin would be 700 USD (5% of currency contract value, 10,000 EUR*1.4*5%). Given that the conversion rate USD/HKD is 7.75, the required margin would be 5,425 HKD for the trade.
Required funds to open 1 lot EUR/USD:
The margin ratio (in percent) indicates how much account net equity is available to maintain the required margin. The account leverage will be lower if the margin ratio is kept high. You can reduce leverage by either increasing the amount of money in your trading account or reducing the number of open positions.
Calculating Margin Ratio: Net Equity ÷ Required Margin × 100
If you had funded your account with 10,000 HKD and opened a new trade of 1 lot EUR/USD at the exchange rate of 1.40000, then your margin ratio stands at around 184%.