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Margin Example

 Assume you have opened a Live Standard FX account, and deposited $10,000. 

When you first login, you will see the 10,000 in the "Equity" column of your "Account Information" window.  You will also see that the "UsdMr" ('Used Margin') is "0.00", and that the "UsblMr" ('Usable Margin' or 'Available Margin') is 10,000, as pictured below:

Your Usable Margin will always be equal to Equity less Used Margin.  Therefore it is the Equity, not the Balance, that is used to determine Usable Margin and will determine if and when a Margin Call is reached.  As long as your Equity is greater than your Used Margin, you will not have Margin Call.  As soon as your Equity falls below your Used Margin, you will receive a margin call.

Now assume that you buy 2 lots of USD/JPY.  Your Equity remains $10,000.  Used Margin is now $1,000, because the margin requirement in a Standard Forex account is $500 per lot.  Usable Margin is now $9,000 (Equity less Used Margin, as pictured below):

If you were to close out that 2 lots of USD/JPY (by selling it back) at the same price at which you bought it, your Used Margin would go back to 0.00 and your Usable Margin would go back to $10,000.  Your Equity would remain unchanged at 10,000.

But instead of closing the 2 lots, assume instead that you purchased 16 more lots of USD/JPY, for a total of 18 lots of USD/JPY.  You will now have the same Equity, but your Used Margin will be $9,000 (18 lots at $500 margin per lot).  And your Usable Margin will now be only $1,000, as shown below:

With this position on, you will make a large profits if USD/JPY rises.  We will illustrate a Margin Call that occurs when USD/JPY falls.  Assume that USD/JPY starts to fall.  You are long 18 lots, so you will see your Equity fall along with it.  Your Used Margin will remain at $9,000.  Once your equity drops below $9,000, you will have a Margin Call.  This means that some or all of your 18 lot position will immediately be closed at current market prices.  The closed position will show up in your Reports or History with the "M" or "MC" code next to it.


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