Margin and leverage questions on mini and micro

Beginner Questions
1

Margin and leverage questions on mini and micro.

  1. When i start forex i will have a small amount of capital around $100-$200 USD. I plan on using mini or micro accounts. i have a few questions

  2. When you open a account do i have to choose my account leverage? If so can i change the the account leverage later?

  3. Does the leverage you set at the creation of the account determine the margin?

  4. What should be the leverage on a mini or micro account?

  5. Should i only use micro accounts because i have low capital? (And yes i can comfortable with scalping)

  6. How much margin would i have to put up in a mini and micro, and how can i figure the margin and the leverage?

I’m really confused on how margin and leverage would work with mini and micro accounts. Any information on how leverage and margin works with small accounts will be greatly appreciated.

Thanks

2

If you are in the US, you’re going to have 50:1 leverage.
That leaves a mini lot out all together, because you would use +/-$200.00 as used margin just to enter a trade.

So, on to micros, or nanos.

With your balance, I would use a broker with the nano lot size.

Penny pips can add up;)

Now, for those totals to figure your margin.

A mini is a $10,000 lot size, and would require a +/-$200 used margin just to open.
A mini lot typically yields +/-$1 pips.

A micro is a $1,000 lot size. That requires +/-$20.00 used margin.
A micro lot typically yields +/- $0.10 pips.

A nano is a $100 lot size, and uses +/-$2 of your margin.
A nano lot size typically yields +/- $0.01 pips.

The +/- is for the variable of the exchange rate at the time of trade entry.

All pairs that start with USD/XXX will be the stated rate.
The XXX/USD pairs will vary slightly.

For instance, the current rate of the euro is $1.3806. To buy 20 euro units to open a micro trade would require a $27.61 margin. That would leave you $72.39 usable margin on a $100 account, and your gain/loss per pip would be $0.10.

It gets more complicated on the cross pairs, but hey… That’s what your broker is for. The platform will solve all of that for you.

I would use nano sizes on an account with that amount of starting balance.

Oanda, and IBFX would be two great places to start.

3

Why do i have the only option of 50:1? I have read in someplaces that you determine the leverage at the opeing of hte account? Are you saying because i live in the US i can only have a acount of 50:1?

Yes i agree :slight_smile:

So since i have small capital i should use micros and nano lots with are Micro 1,000
Nano 100 Correct? But use nano

how do you know that nano lot will use $2 of margin?

THanks

4

I have neve had the option at opening an account of choosing leverage on any broker. Not to say it isn’t there, it’s just been somewhat predetermined.
And yes, live in US, 50:1 is max leverage.

$100 is correct for a nano. It would require that $2 margin.

I control my leverage by my lot size personally. I use a very small percentage of my account on any one trade. Roughly $0.01 for every $200 in the account. So basically, I’m not using leverage at all.

It’s 1/10 of a micro that uses $20.00…

5

so i would be ok using 50:1 leverage? on micro and nano accounts?

100 (lot size) / 50(leverage 50:1) = $2 Witch means i only put up $2 dollars from my $200 dollar account to trade 100 lots of currency?

Now how do i know how much i would make per pip move? would that be 0.01 for every pip +/-?

8

The reason why i ask about the leverage is becuase on the pip school site its talks about higher leverage See the chart Margin Required with Maximum Leverage it talks about leverages up too 400:1. Is 400:1 allowed in different countries?

Leverage and Margin Defined | The Number 1 Cause of Death of Forex Traders | Learn Forex Trading

Thanks

9

Your maximum leverage depends on the country/broker. In the U.S., max is 50:1. In other countries, leverage can go as high as 400:1.

Also, most brokers allow you to change leverage in your account settings by just a couple of clicks. Best if you ask the broker you wish to open an account with this.

10

I didn’t know that max leverage was 50:1 in the US thank you both for clarifying that.

Is my math correct on where master tang is getting the $2 dollars to put up for margin from the initial deposit of capital?

Thanks

11

pg, I just recently opened my account with 100 bucks with IBFX. I have been very pleased with them so far. I only trade micro lots right now and yes it is 10 cents a pip. I can vouch for tang on that one.

Trading 1000 lot sizes (micro) will allow you to only trade basically 2 positions at any given point without getting a margin call immediately. I rarely do two positions at the same time though unless I have one trade that is already doing well.

Occasionally if I have a longer than usual trade I will get popped with a swap fee, but it isn’t very often. I don’t completely understand the swap fee, but I think it is some sort of interest switch between banks or something like that.

Onto Nano lots sizes (100), you definitely won’t break your bank with those and you can do a bunch of them at once. I’ll tell ya though, they really bore the heck out of me. Yes, Nano’s (100) are definitely in and around the $2 area depending on the currency pair you are trading.

This info is solely based on my 6 days of live trading using IBFX.

Cheers and good luck!

edit - 50:1 leverage is what I have and it seems perfectly fine.

12

I have been trying to understand margin and leverage whole day so let me see if i am right this time. If i open account with $200 and buy 1 nano lot(worth $100) my used margin would be $100 and usable margin would be $100. That is $100 would be used as cushion for my losses and with nano lot each pip would be worth $0.01. So is my math right?

13

Here I will just show you it will make more sense. :slight_smile:

sample report.jpg700×218 25.5 KB

14

Masteri! I didn’t get it right away either. It took a margin calculator for me. I wont post links but look up a margin calculator and a pip value calculator. You will realize it depends on the pair. Each pair has differnt margin requirements and some differences in per pip value. If you are in the USA make sure to use 50:1 leverage settings.

15

OK so then why do people say too much leverage can kill new traders? But if i had 400:1 leverage i would have to put less up for margin. Unless in terms of leverage less is more for example 5:1 leverage i would have to put more up for margin then less margin with 50:1 leverage.

Correct?

16

I’m not going to try to protect unskilled traders but the word is that they put too many lots in and always get margin called out. With a large amount of leverage it takes more of your good faith deposit than if you just had 10:1. Or the flip side is they only put in a small amount of lots or just one and let it run against them in the hopes that they will break even. The more leverage you have the less price has to travel on the pair to take your deposit.

Leverage is a tool that needs to be understood before you trade. Just because you may be a new trader doesn’t mean you can’t be a skilled one.

Good luck trading!

17

God bless you Master Tang! Your piece is a fine example of what many of us aim for, i.e., ‘Plain English’!

18

Hey,I’m confused may I ask how do I calculate lot sizes for micro account .I’m new to trading and I think k of opening a micro account .

Thanks

19

Greetings I’m new to forex trading and I think of opening a demo micro account , I just want to know how to calculate lot sizes per trade on a micro account…I don’t want to trade without knowing fully on how lot sizes really work like others do

20

This is a 7 year old thread, with one post 5 years ago.
I suggest you read the free school right here to begin with before opening an account.
To answer your question, a micro lot is 0.01 of a lot so in a usd pair 1 pip movement equals 10 cents

21

Ok, so one pip is 10 cents on a micro account , if it involves USD as base currency or Qoute currency

XXX/USD or USD/XXX?

22

It is 10 cents per pip for 0.01 lots for pairs with USD as a quote currency (XXX/USD). Actually it is in general like this: if you trade XXX/YYY 1 pip for 0.01 lots will be 0.10 YYY if the traded pairs is with 5 decimilas. I hope that makes sense to you.