Margin : Prevents Negative Balance

Trade stations have margin management capabilities. In the even that funds in the account fall below margin requirements, the broker's dealing desk will close all open positions.

The new NFA rule requires a minimum 1% margin at all time to maintain an open trade.

Based on 1% margin requirement

Example 1 : GBP/USD
rate: 2.0242/2.0246
account type: 100,000/lot account
1% leverage: 100,000x0.01(1%) = 1000units

When you are Long(buy) GBPUSD, the margin required is:

2.0242 (GBP/USD) x 1000 (units of the base currency GBP) = USD2024 for each lot.
Some brokers require $1,800 margin for GBP pairs.

Example 2: EUR/USD
rate: 1.4109/1.4111
account type: 100,000/lot account
1% leverage: 100,000x0.01 (1%) = 1000units

When you are long(buy) EURUSD, the margin required is :

1.4111 (EURUSD) x 1000 (units of base currency EUR) = USD1411 for each lot.

Some brokers require $1,300 per lot in margin for EUR based pairs. In general, a margin of $1,300 allows you to control a $100,000 spot currency position. This is an efficient use of trading capital as the leverage in futures and stock markets is much lessers.

Example 3: Where the USD is the Base currency, the margin requirement is USD1000 (ie 1% of 100,000)

When you are long USDCHF, USDJPY etc the margin required is USD1000 for each lot.