The international currency market arose on the initiative of large national banks. On it, they carry out trading operations for currency exchange, make speculative transactions and execute orders from clients. Minimum volume Money is 100 thousand units of the base currency. The base currency is usually the US dollar.

Ordinary traders who do not have multimillion-dollar capital have to turn to intermediaries for work on Forex: brokerage companies and dealing centers. In addition to providing access to currency quotes and withdrawing customer orders to the interbank market, the intermediary compensates for the lack of funds. This type of trading is called margin trading.

Forex Margin Level and Leverage

The essence of margin trading is that the dealer or broker gives him the amount of money that the trader does not have enough to complete a foreign exchange transaction in an interest-free loan. Thus, the client of the company gets the opportunity to carry out speculative operations on equal terms with the rest of the market participants, in fact, having funds in the account that are hundreds, and sometimes thousands of times less than necessary. This is achieved through leverage, which is main feature this type of trade. Leverage is the ratio of the loan amount to the size of the foreign exchange transaction.

A margin loan significantly exceeds the amount of a conventional loan issued, for example, in banks.

Thanks to such a loan, the trader makes transactions of a much larger volume than he would carry out trading exclusively with his own money.

For example, a trader has $1,000 in his account. The broker gives a leverage of 1 to 100. It turns out that the client can trade in the amount of 100 thousand dollars. In this case, the cost of 1 point when working with only 100 dollars is equal to 1 dollar. If the price changes in the right direction by 20 points, the income will be $20. Now let's assume that the trader works without leverage. Then he will earn 100 times less, only $0.2.

However, leverage allows you to get not only profit large sizes, but also the corresponding losses. And, for example, if the price goes in the wrong direction by the same 20 points, then the loss will be $20. And without leverage - $0.2.

Minimum margin level in the Forex market

When opening a trade, a trader automatically receives a certain amount of money as a loan.

At this moment, the dealer risks his own funds, which, together with the client's money, end up in the interbank market. After all, he, in turn, takes the money he needs to work with clients elsewhere, usually in a bank. Therefore, he takes part of the funds as collateral.

The remaining free money is called free margin.

You can conduct new transactions on them or add them to an already open order.

Also, any broker or dealer has the concept of a margin level. - this is the ratio of free funds on the trader's deposit to the margin, expressed as a percentage.

Or simply the margin level is used for competent control of trading capital. It is necessary to monitor the level of margin, especially with losing trades. At such moments, it drops and can reach a critically low level. This meaning is called Forex minimum margin level. In the literature, this level is also known under another name - Margin Call.

The minimum margin level tells the trader that in order to continue trading, he needs to increase the amount of free funds on the account.

Otherwise, if the losses continue to grow, the broker will automatically close positions, trying to save his client from a negative balance on the deposit.

Forex Margin Level and Loan Conditions

Credit for margin trading is provided automatically with each new transaction. Terms of this loan:

This type of loan does not require additional documents and agreements;

The trader's funds in his account serve as collateral for the loan;

During one trading session, the credit is provided free of charge, and only when transferring the position to the next day, the spo is charged;

Credit is given for any currency with which you can work with this broker.

The margin level allows you to control the safety of the deposit. By monitoring the value of the margin level and not allowing it to fall too low, the trader reduces the risk of a complete loss of funds in the trading account.

Today you will understand how to understand the balance values ​​in MetaTrader 4 and 5 with open transactions. What is free margin and just margin (collateral), for what reasons a broker can close a trader's transactions on the exchange, and also what margin level should be maintained, need to find out long before the start of the auction. This will help to avoid a lot of misunderstandings and deposit drains.

When a trade is opened in MetaTrader, there are many different values ​​in the balance line, we will analyze each of them.

"Balance" indicator in Metatrader

(Balance) is the amount of money in the this moment on deposit. The balance is an actual value if the trader does not have any trading positions open. That is, if a trader replenished his account with $100 and did not make any transactions, then his balance should be $100. If he closed the trade with a profit of $5, then the balance would be $105.

When a trader has one or more positions open, the "Balance" indicator loses its relevance, and the potential state of money should be monitored by the "Funds" indicator.

Indicator "Means"

Funds, or equity- this is the current state of the balance, if you close absolutely all transactions right now. That is, the difference between equity and balance is profit/loss from open positions.

During trading, the numbers in the "Funds" column are constantly in a "floating" state, as market conditions change every second.

For example, if the balance is the same $ 100, and the profit on open transactions is $ 5, then the “Equity” column will be the number 105. However, in the next seconds, this figure can either increase or decrease, depending on how quotes for open trades change.

What does the Margin (Collateral) indicator mean in simple words

Having learned the two main indicators of the state of the trading account, you can smoothly move on to what is margin in Forex.

So, if in the world of business margin means the difference between price and cost (analogous to profit), then in trading this term has a completely different meaning. Most Forex traders trade with leverage to increase potential returns.

Leverage- these are credit funds provided by the broker to the trader for the implementation of transactions that exceed the volume of the trader's funds.

leverage, or Leverage, is determined by the number of borrowed dollars for every dollar in the trader's account. The most commonly used leverage is 1:100, but there are also 1:50, 1:200, 1:500, 1:1000 and even 1:2000.

If we consider the standard leverage of 1 to 100, then trading looks like this: a trader, having $100 in his account, can make transactions up to $10,000, leaving his money as a pledge with a broker.

If we simplify the numbers for ease of perception, then without leverage, with a balance of $100, a trader will not be able to buy even one ounce of gold, which costs, for example, $1,200, while with a leverage of 1:100, he will be able to buy as much as 8 ounces . Not only does leverage allow access to trade in expensive assets, but it also increases the potential return on invested capital due to a larger trading volume.

What happens if free margin is in the red?

The fact is that when a certain ratio of funds to margin is reached, the broker will forcibly close all open positions. Therefore, it is very important to keep an eye on the free margin indicator so that you do not open too many trades or trades of large volumes without allowing yourself to take a step back. Any transaction can temporarily go negative, this is why free funds are needed, if there are none, then all transactions will automatically close at a loss, and you will lose all funds.

What is the margin level in an open trade

Along with free margin, an important indicator is the level of margin. It shows the ratio of equity to margin. Many traders are wondering what is the recommended margin level to maintain. In fact, there is no universal recipe, each trader maintains the level of margin that he considers safe.

There is general rule money management, following which the sum of all open positions should not exceed 10% of the deposit, that is, the margin level should be 1,000%.

At the same time, each broker has certain conditions for maintaining the margin level, that is, at a certain level (often it is equal to 50%), the broker will forcibly close the trader's position and fix the result.

The margin level is calculated as a percentage. The calculation is carried out according to the formula:

Equity/Margin*100%.

For example, if the equity is $1,000 and a trade is open with $100 margin, the margin level would be 1,000%. The higher this indicator, the more the deposit is protected from the forced closing of transactions by the broker.

If open positions become unprofitable, then the amount in the "Equity" field decreases, therefore, the margin level falls.

Forex trading comes with an increased level of risk. Part of the risk comes from market factors, but mostly, inexperienced traders lose their deposits due to trading with high leverage.

A leverage of 1 to 100 can increase both profits and losses from trading by a hundred times. Moreover, it is very easy to drain the first deposit if you do not follow the recommendations of more experienced traders:

1. Do not open positions for the entire deposit. The term Stop Out was used in the description of the free margin. This is a situation where the broker forcibly closes all of the trader's positions because the margin level has dropped to a certain level. For some brokers, this level is set at around 20%, for some - 50%. In any case, this is done in order to reduce the trader's losses from unsuccessful trades. If the deposit is $100 and it is all collateralized at 1:100 leverage, then the asset price only needs to move one percentage point in the wrong direction for the deposit to be completely drained. Of course, Stop Out (if it is not set at 0%) will prevent this, but no trader will like to lose even half of the deposit quickly. It is best, especially at first, to use no more than 10% of your deposit.
2. Don't use high leverage. You should not start trading with a leverage of 1 to 1000, because this is fraught with large and instant losses. Of course, the prospects for big gains are dazzling, but for beginner traders, the reality of the forex market is harsher. It is best to start with a leverage of 1:50 or 1:100.
3. Do not risk a significant amount for yourself. A person is always afraid of losing, but there is a difference between losing 10 or 100 dollars. It should be understood that profitable trading at the initial stage is the exception rather than the rule. Therefore, the first deposit should be considered as a contribution to your financial education, and not as initial capital for real trading. And in order to understand how the market works, what functions the terminals have and what determines the price of certain assets, a large deposit is not needed.

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Now, when the words "Margin", "Margin Level" and "Free Margin" do not cause bewilderment, you can safely open transactions without fear for incomprehensible numbers in the balance line.

If you find an error, please highlight a piece of text and click Ctrl+Enter.

Despite the variety of various trading terminals, the MetaTrader 4 platform is still the most popular tool for trading on the Forex currency market. The interface of the MetaTrader 4 trading platform is intuitive and does not require any special education to use. Nevertheless, it would seem that the simplest things sometimes raise questions.

In order to evaluate his trading account or make a decision to open or close a transaction, a trader needs to constantly monitor the main indicators of his account. There are five such indicators in the MetaTrader 4 terminal: Balance, Funds, Collateral or Margin, Free or Free Margin, Level. These indicators are available in the "Terminal" tab.

Let's take a closer look at what each of the five indicators of a trading account means.

Your MT4 account "Balance" metric

Balance is an indicator that displays the amount of money in the trader's trading account. A feature of the "Balance" indicator is that it does not take into account profit or loss on open transactions, but only records available funds, as well as plus and minus on closed transactions.

For example, suppose you had $10,000 in your account. Two deals were closed. One with a profit of $500, the other with a loss of $498. So the balance is 10,000 + 500 - 498 = $10,002.

Indicator "Means"

The "Equity" indicator, unlike the "Balance" indicator, also takes into account the current results of open trades. In simple words, Equity is the money that will be on the balance sheet if all open trades are closed.

For example. The balance is $10,002. A buy trade has been opened in the EUR/USD pair. The current loss on the trade is $22. Accordingly, the indicator "Means" is equal to 10,002 - 22 = $9,980. That is, if a trader closes the deal right now, with a loss of $22, the amount of $9,980 will go from Equity to Balance.

"Collateral" or "Margin" indicator

As you know, the easy accessibility of trading in the Forex currency market provides, which allows the trader to pay only a part of the amount necessary to open an order. The "Margin" indicator just displays this amount. The amount of collateral depends on the amount of leverage used. The larger the leverage, the smaller the margin amount. With a leverage of 1:10, the margin for opening a deal will be 10% of the required amount, with a leverage of 1:100, the margin will be 1%.

For example, a trader opens a buy deal in the euro/dollar pair with a volume of 1 standard lot. As you know, a standard lot is 100,000 currency units. That is, a trader buys 100,000 euros for dollars. The current price is 1.11995. Thus, $111,995 is needed to open a trade. The leverage on the trading account is 1:200, that is, to open a deal, a trader needs 111 995: 200 = 559,98 dollars we see in the "Margin" indicator (the result is rounded from 559.975).

"Free" or "Free margin" indicator

The "Free Margin" indicator displays the amount of funds on the account available for opening trades. It is calculated simply: Free \u003d Funds - Collateral (Margin)

Accordingly, in our example, the “Free” indicator is 9,980 (Funds) - 559.98 (Deposit) = 9,420.03(The result has been rounded as the bond is actually $559,975.)

Indicator "Level"

The “Level” indicator is perhaps the most important of all the above. It displays the ratio of Equity to Margin, expressed as a percentage.

Let's go back to our example. The "Level" indicator will be equal to 9,980 (Funds): 559.98 (Deposit) x 100% = 1782.22%.

The “Level” indicator is directly related to the stability of open trades. Why is he so important? Ordinary mathematics. The more transactions are open, the greater the denominator, in which we have the "Margin" indicator. If the loss on one or several transactions grows, the value of the “Equity” indicator in the numerator decreases, and the denominator “Margin” remains unchanged.

Forex brokers and DCs in their trading regulations, which for some reason few people look at, indicate the threshold value of the “Level” indicator, upon reaching which open transactions will be closed forcibly. Often this situation becomes an unpleasant surprise for traders and causes claims against companies.

Now that the incomprehensible numbers and percentages have acquired a fairly clear meaning, the trader will be able to more adequately assess his trading opportunities by multiplying his “Balance” indicator and never meeting with.