Required Margin is calculated based on the leverage used and is the amount of equity needed to open and maintain a position.
Formula: Margin = (Contract size*Lot Value) / Leverage.
Assuming that your trading account has a leverage ratio of 1:30 and you wish to buy 1 Lot (fixed at 100,000) of EUR/USD, leverage gives you the ability to pay 1/30 of the actual invested amount (this will be the margin used for this single position).
1 Lot EUR/USD = 100,000 EUR against USD
If the EUR/USD opening price was 1.12 the Trade value will be (100,000 * 1.12) or 112,000 USD.
The required margin for the above-mentioned position is (112,000 / 30) = 3733.33 USD.
The free margin appears at the bottom of the platform and represents the difference between the trading account’s equity and the open positions used margin.
Free margin = Equity – Used Margin
A percentage value based on the amount of usable margin and equity. If the margin level is less than 100% Rodeler Ltd may freeze opening new orders. If the margin level is lower than the margin call level (at 100% of the margin level) the trader is advised to deposit more funds. Rodeler Ltd may automatically close open orders and prevent further trading when the margin level falls below the stop out level.
Formula: Margin Level = (Equity/Used Margin) * 100
Margin call occurs when the trader’s equity as a percentage falls below the margin requirement.
It should be noted that Rodeler Ltd does not bear an obligation to provide a Margin Call to any trader. Nevertheless, traders are advised to maintain a margin level above 100%.
Stop Out level is 50% of the Margin Level. When the Stop Out level is reached, the system will start closing your positions automatically, without prior notice.
A client deposits 50,000 USD with leverage to 1:30. The trader may open positions of up to (50,000 * 30) = 1,500,000 USD (on major Forex pairs).
Assume stop out is at 50%
The client opens a BUY position of 5 LOT EUR/USD at 1.12.
Volume of the particular position will be (500,000 EUR * 1.12) = 560,000 USD.
Assuming the Floating PL the moment the client opens the position is -500 USD.
Used margin will be (560,000 / 30) = 18,666.67 USD.
Free Margin will be (49,500 – 18,666.67) = 30,833.33 USD
Margin Level will be [(49,500 / 18,666.67) *100] =265.18%
If the EUR/USD rate rises to 1.135, the trader will make a gain of [(500,000 EUR * 1.135) – 560,000 USD] = 7,500 USD.
Free Margin will rise to (57,500 – 18,666.67) = 38,833.33 assuming the position was not closed yet.
Margin level will rise to [(57,500 / 18,666.67) *100] =308.04%
Loss Making Scenario:
If the EUR/USD rate falls to 1.050, the trader will make a loss of [560,000 USD – (500,000 EUR * 1.050)] = – 35,000 USD.
Free Margin will fall to (15,000 – 18,666.67) = -3,666.67 assuming the position was not closed yet.
Margin level will fall to [(15,000 / 18,666.67)*100] = 80.36%
Since the margin level is below 100%, trader could not open new positions.
If the EUR/USD continues to fall and reaches 1.025, the trader will make a loss of [560,000 USD – (500,000 EUR * 1.025)] =- 47,500 USD.
Margin Level will fall to [2,500 / 18,666.67 * 100] = 13.39%. Since the Margin Level is now below the stop out level of 50%, the trade will automatically be closed by the system.
||MARGIN CALL LEVEL
||STOP OUT LEVEL
|All retail account types