Hi,

1. Initial date:

In this lesson, with the informations from “Example #3: Open a long EUR/AUD position”.

2. Question:

There is no information related to AUD, except that “Margin Requirement is 3%”, where 3% is the Margin Requirement for EUR/AUD (taken from a table of above in the lesson).

I did not understand well the phenomenon in “Example #3”.

How is it possible to go long EUR/AUD, that means to buy EUR and sell AUD, but the “Example #3” does not make any reference (about AUD) to the fact that it sells AUD, especially since the deposit is denominated in USD ?

Can someone help me understand the phenomenon (step by step) better?

Hello!
Let me break it down for you.
First of all you need to calculate the leverage, If the margin requirement is 3%, then the leverage would be 33.33:1. This is because leverage is the inverse of the margin requirement. To calculate the leverage, you divide 100 by the margin requirement percentage. In this case, 100 divided by 3 is equal to 33.33. Therefore, the leverage is 33.33:1.
Then when you are going to consider margin for X/Y pairs, (none of them are USD). This is the formula:
Margin= Lot * contract size * price (X/USD) / Leverage

Here
Margin= 10000 (contract size ) * 1.15000 ( Eur/usd price here) / 33.3 ( the leverage) = 345.34

I tried to explain it in the easiest way possible, I hope it helps you out.

Your formula seems to be the same with this:

Required Margin = Notional Value x Margin Requirement x Exchange Rate Between Base Currency and Account Currency