How do you count the security deposit?

Na Forex market we have various sizes of financial leverage and a whole lot of currency pairs at our disposal. Everything is standardized so as not to confuse the different trading platforms and brokers' offers. Nevertheless, novice players often have no idea before opening a position how much money will be blocked on their account for the transaction. I hope this article will explain clearly how to count the so-called Margin.

Margin (Margin)

These are funds that, at the time of the transaction, are blocked on the broker's account from the customer's deposit and are treated as collateral until the position is closed.

Brokers offer different sizes of leverage which has a significant impact on the size of the deposit taken. The bigger lever, the smaller the Margin.

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The deposit also depends on the financial instrument on which transactions will be concluded. More specifically, on currency pairs it will depend on the base currency, which is the first in a pair, and the volume of transactions. The bigger the flight, the bigger Margin downloaded.

Examples:

1. For a currency pair EUR / USD the base currency is euro, so the original margin will always be in EUR. 1.0 lot represents a transaction value of 100 units of the base currency, which in this case is 000 EUR. Assuming that the brokerage account has a leverage of 100: 000, it means that instead of blocking the Margin for the entire amount of the transaction, we only need to secure the amount 1 times smaller, i.e. EUR 100. And that is the Margin required for this transaction.

2. On USD / CHF pair the base currency is USD. With the 0.5 transaction volume, the transaction value is 50 000 USD. At the 1 leverage: 500, a deposit of 100 USD will be charged.

With all other sizes volume, leverage and currency pairs, it works similarly.

In the event that we keep an account in a different currency, e.g. in Polish zlotys, the amount of the deposit collected is always converted at the current average market exchange rate of PLN. For example, 1. and the EUR / PLN rate of 4.20 will be Margin in the amount of 4 200 PLN, while in 2. the example at the USD / PLN 3.50 rate will be 350 PLN.

Calculators

Can use FX calculatorswhich will quickly calculate the value of the margin for a given financial instrument, indicated leverage and transaction volume. Each of the brokers has such tools in the customer panel.