# Confused on how leverage and margin was calculated in this trade - please can someone help explain these MT4 figures?

I’m currently going through the babypips Forex course and have created a demo account on Pepperstone to get used to the platform and to test out trades (using Metatrader 4).

On the GBPUSD pair, I used these values in the Position Size calculator:

• Account Balance of £5000,
• Risk Percentage of 2%,
• Stop Loss (pips) of 36.1,
• and Current GBP/USD Ask Price of 1.3846.

This told me that the Amount at Risk was 100 GBP and gave me 0.3835 Standard Lots.

So, I went onto MT4 and put in these figures which lead to the following values:

• Balance: £5000
• Equity: £4977
• Margin: £1269
• Free Margin: £3708
• Margin level: 392%
• Profit: -23

If the required margin on the GBPUSD pair is 5%, then £5000*0.05=£250 (much lower than the £1269 specified), and not sure what leverage has been used in that calculation. Wondering if someone could help me work out how the Margin has been calculated here (think I’ve confused myself)?

Margin is not calculated from the account capital, it is produced from the total value of the position.

Ohh okay - so in this case the margin would be 0.3835x100000x0.05 = £1917 required margin?

That’s a bit higher than the actual figure of £1269 - I assumed it was 5% across all brokers, but perhaps not - if I do 1269/(0.3835x100000) = 3.3% which I presume is what the margin requirement is for this broker

Also, I’m a little confused on how leverage fits in - I understand it gets included inside the calculation, so does it vary depending on the lot size I use?

Apologies for the beginner questions - I’m sure it’ll click soon

Sorry, I’ve never had to work in lots as I spreadbet forex - its just £ per pip.

Brokers, CFD providers and spreadbetting firms in the UK are required to offer margin on major forex pairs of no more than 30x. A limit of 20 applies to indices, shares, commodities etc.

It is quite important to focus on what margin a broker is offering and it is good that you’re getting a decent one. I’ve been looking for good brokers that provide quality trading conditions and have at least some choice with platforms.

Yes, trading on margin is something I look forward to as well. What brokers did you select?

I started with making a proper list but a lot of brokers on it did not meet my requirement. So now I have shortlisted these two - FXTM and Turnkey Forex based on their MT4/5 platforms and spreads. I’ll research more.