What is Margin Requirement in Forex?

What is Margin Requirement in Forex?

In order to understand what margin requirement means in forex, it’s important to recall some of the other commonly used margin terms.

Margin is the small bit of capital that a broker sets aside in order for a trader to open a position.

Margin is a value of capital that a trader’s broker sets aside so that the trader may open a new position. It is essentially a deposit, a type of insurance, the minimum amount of money that your forex broker requires so that you may open a new leveraged trading position.

The required margin is the amount of money that will need to be set aside as a deposit.

The required margin is determined based on the margin requirement that a broker sets- it is represented as a percentage figure.

margin requirement in forexSo, what exactly is the margin requirement?

Margin requirement in forex is simply the percentage amount that a broker sets, which determines how much margin is required (required margin) for a trader to open a new position.

It is a percentage of the full size of the position.

The margin requirement figure is provided to the trader by the broker so that they know how much margin will be needed as a ‘deposit’ if they choose to open a certain trade.

The value depends not only on the forex broker but also on the specific currency pair that is to be traded.

Forex margin requirements are expressed as percentages, such as:

What is Margin Requirement in Forex
Margin Requirement Examples for Specific Currency Pairs, Courtesy of BabyPips.com
  • 2-5%
  • 1%
  • 0.5%
  • 0.25%

When a trader knows the margin that is required by the broker, it allows the trader to calculate the maximum leverage they may use with their trading account.

Margin Requirement Formula

There is no specific formula for margin requirement since the value is just a percentage, representing the amount of money a trader needs to open a leveraged position.

The margin requirement is a figure that is determined by a forex broker.

However, the margin requirement is used in other formulas.

For example, margin requirement is required to calculate required margin.

To do this, the following formula is used:

What is Margin Requirement in Forex
The formula for Required Margin

The expanded formula is as follows:

What is Margin Requirement in Forex
Expanded Formula for Required Margin

Margin Requirement Example

If you want to see examples of margin requirements, all you need to do is go to a forex brokers website.

Once you are on the broker’s website, it shouldn’t be hard to find their margin requirements.

This page should tell you the margin requirements correlating with the specific currency pairs.

For example, you can find Forex.com‘s margin requirements here.

It looks like this:

What is Margin Requirement in Forex

This is only a partial screenshot- the full table is much larger.

Most forex brokers make their margin requirements available to view.

Margin Requirement Calculator

Since margin requirement is simply a percentage that is determined by the forex broker, there is no ‘margin requirement calculator’.

However, there are calculators that allow you to use the margin requirement to calculate other figures, such as the required margin.

One such required margin calculator can be found at xm.com.

With this calculator, all you need to do is input the following:

  • account base currency
  • currency pair
  • leverage
  • size of the position in lots

The calculator then will instantly provide you with your required margin!

What is Margin Requirement in Forex
Required Margin Calculator at xm.com

Learn to Trade Forex

Reading and learning common forex terms such as margin requirement is a great way to expand your knowledge and become more familiar with the forex markets.

That said, simply learning definitions will not actually teach you how to actively trade the forex markets nor will it teach you how to actually make money.

Turning consistent profits in the forex markets can be difficult and, unfortunately, the majority of traders lose more than they win.

In order to become a competent trader and get to the point where you are consistently making a profit every single day, it’s important to make the investment for a forex course.

If you are a novice forex trader and want to learn how to make profitable trades, check out our post about a forex course that will take you from beginner to pro, very quickly.

Also, if you want some more info on profitable forex trading, make sure to grab your Free Forex Trading PDF– check out the sidebar to the left of this post to see how you can get a copy sent straight to your email.