What is Used Margin in Forex?
Used Margin in forex is most often confused because there happens to be a lot of different ‘margin‘ terms in forex.
If you recall, required margin is the amount you set aside when enter a new position.
Every position you enter will have its own separate required margin.
Used Margin is the value of all of the required margin of all open positions.
Used margin in forex is essentially the money you don’t have access to, because it is the margin currently being ‘used’ in current trades.
The difference between required margin and used margin in forex is that while required margin is only related to one specific trade, used margin is the value of the total money needed to keep all of your trades open.
Example of Used Margin in Forex
Here’s an example to help explain the concept if you’re still confused.
For this example, let’s say you deposited $2000 in your account (USD).
You want to open a position on the following two pairs:
USD/EUR – Margin Requirement 4%
USD/JPY – Margin Requirement 5%
You would like to open one mini lot position.
Let’s calculate the required margin for both.
USD/EUR required margin is calculated with $10,000 x 0.04 (10,000 is because we are using mini lot position).
USD/JPY required margin is $10,000 x 0.05.
USD/EUR = $400
USD/JPY = $500
So, Used Margin is $900.
Since we have a total balance of $2000 in our account, we have $1100 left to trade with.
If you have trouble with doing the math manually, you can also determine used margin with the use of a free online calculator.
Used Margin Calculator
There are calculators online that allow you to calculate required margin, which you can then use to calculate your used margin by adding all the required margin values for your final total.
If you need to calculate used margin quickly, XM.com has a great margin calculator.
You can find it at this link.
All you need to do is input your account base currency, the currency pair and your leverage, and enter the size of your position in lots.
The calculator will then output your required margin. Find the value of required margin for all your trades and add them up to figure out your total used margin.
Learn to Trade Forex
Learning all about margin in forex is a great way to increase your knowledge in understanding how forex trading works.
That said, knowing what used margin in forex is does not actually help in knowing how to actually make trades that will make you money every single day.
Unfortunately, the sad truth is that more forex traders fail than succeed. While forex trading can be very profitable, it’s no secret that you can also lose all your money very quickly if you don’t know what you are doing.
If you are a beginner forex trader and would like to learn how you can make big profitable trades consistently, day in and day out, then I suggest you do your homework and enroll yourself in a forex course.
If you are a novice trader and want to learn everything you need to know and more by a guy who make a lot of money doing it, go check out my post here.
And, if you haven’t already, feel free to grab your Free Forex Trading Fortunes PDF, a great introduction into how you can start making money with forex trading.
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