A couple of questions about Margin...

[trader]

Hi all,

This being my first post I think I should firstly thank and congratulate BabyPips on an awesome website. The information here is great and I'm really enjoying learning here.

I have a couple of questions about margin.

I have a USD demo account at Oanda. I am trading GBP/USD. Their margin requirement is 2%.
If I have a $1000 usable margin and I buy 10,000 units of GBPUSD at 1.96607, this is $19660.7 trade value. My margin used is $654.50. What I cant figure out is how to calculate how many units I need to purchase if I want to use, for example $300 of my usable margin. Is it correct thing to do? Or is it more common to buy as many units as possible, leaving just the margin requirement (%2) as usable margin. Or is it best to calculate how much of a movement (pips against you) you will be able to sustain at X amount of units, and go from there?

Thanks in advance

AP

[topgun]

I use Oanda too and depending on the amount of leverage you are setup for will determine how much margin is required. You can change your leverage by choosing "account", then "change leverage". If you set it to 50:1 then it will be 2% margin requirement but that is not the default. I think 20:1 is the default. I also change my default unit size under "Tools", "User Preferences", then "Quotes".

For example, if you set your default leverage to 50:1 then change your default unit size to 10000, then you will only require $393 (2%) margin and you will be trading at $1/pip (according to your example). Of course you will require more margin if the GBP appreciates against the USD and the quote rises. According to your example it sounds like you are set to 30:1 leverage which requires 3.3333% margin or $655 in your case. See link for leverage & margin requirements at Oanda. Hope this helps and not confuses you more !

OANDA FXTrade - Margin Rules

Originally Posted by trader

Hi all,

This being my first post I think I should firstly thank and congratulate BabyPips on an awesome website. The information here is great and I'm really enjoying learning here.

I have a couple of questions about margin.

I have a USD demo account at Oanda. I am trading GBP/USD. Their margin requirement is 2%.
If I have a $1000 usable margin and I buy 10,000 units of GBPUSD at 1.96607, this is $19660.7 trade value. My margin used is $654.50. What I cant figure out is how to calculate how many units I need to purchase if I want to use, for example $300 of my usable margin. Is it correct thing to do? Or is it more common to buy as many units as possible, leaving just the margin requirement (%2) as usable margin. Or is it best to calculate how much of a movement (pips against you) you will be able to sustain at X amount of units, and go from there?

Thanks in advance

AP

[rhodytrader]

Originally Posted by trader

I have a couple of questions about margin.

I have a USD demo account at Oanda. I am trading GBP/USD. Their margin requirement is 2%.
If I have a $1000 usable margin and I buy 10,000 units of GBPUSD at 1.96607, this is $19660.7 trade value. My margin used is $654.50. What I cant figure out is how to calculate how many units I need to purchase if I want to use, for example $300 of my usable margin. Is it correct thing to do? Or is it more common to buy as many units as possible, leaving just the margin requirement (%2) as usable margin. Or is it best to calculate how much of a movement (pips against you) you will be able to sustain at X amount of units, and go from there?

If you want to use a specific amount for margin then you can figure out how large a position you can trade by using this formula:

Margin Desired x Leverage

So in your example with 2% margin:

$300 x 50 (2% margin is 50 to 1 leverage) = $15,000

If you are trading a USD-base pair like USD/JPY, you have your units. If you are trading a non-USD base pair like GBP/USD, you would then divide that trade size by the exchange rate to get units.

Having said that, you really should be determining your position size based on the amount of risk you are willing to take on the trade - a combination of the amount of pips you think are at risk on the trade and the amount capital you're risking.
For example, if you are willing to risk $100