My real question here is WHAT THE HELL is Margin Percentage in the MT4 Market Watch ‘contract specification’ tab?
(Right-click any pair in the Market Watch pane, and select ‘Specification’)
“Margin percentage – determines what part of the base margin size value calculated according to the symbol type is charged”
Not very helpful
I’m sure these wildly different percentages have a significant effect on position sizing, but does anyone know how they can be factored in to calculations so that we know exactly how much margin is required/available to use for any given forex pair?
I’ve found this explaination “For instance, accounts that will be trading in 100,000 currency units or more, the margin percentage is usually either 1% or 2%. So, for an investor who wants to trade $100,000, a 1% margin would mean that $1,000 needs to be deposited into the account. The remaining 99% is provided by the broker.”
Basically stops you opening a trade unless you have the margin % in your account
So they protect themselves with a buffer against the possibility of the customer losing over 100% of his margin and then having to chase the customer for more money. So they set their risk software to block trading unless available margin is above 100% of required margin, for example 120% or 110% or 130% according to their own risk models.
This added available percentage over the required margin dictates the trigger to block the trade/order. This vital information can be found by right clicking the pair in the ‘market watch’ window and selecting ‘specification’ and looking at the ‘margin percentage’ variable.
margin required (in terms of base currency) = margin percentage * lot size * contract size / leverage
to get the margin required in terms of account currency, we can use an exchange rate.
for example, XAU/USD has a contract size of 100 and margin percentage of 333%.
for 0.1 lot of XAU/USD and leverage 1:100, margin reqd = XAU/USD * 333%* 0.1 * 100 / 100 = 566.1 USD (approx)
for another example, XAG/AUD has a contract size of 5000 and margin % of 200%.
for 0.01 lot of XAG/AUD, margin reqd = XAG/AUD * 200% * 0.01 * 5000 / 100 = 31.7 AUD (approx)
This “margin percentage” value is really mysterious. My margin percentage for XAUUSD is 0.3%. I asked my broker, what it meant and the CS said becaue leverage for metals is 1:333 (in my 1:1000 account ), 1÷333 = 0.3%.
I said ok.
Then I asked, “why is it that the EURUSD pair has 100% margin percentage in the same account, the same math formula would work out to be a leverage value of 1:1. How does that work for a 1:1000 account?”. Then he started to not make any sense in his answers, giving formulas for margin level, which is a totally different thing.
One interesting thing to note. Your example for XAUUSD’s margin percentage is 333%, whereas mine is 0.3%. Isn’t that interesting?
), 1÷333 = 0.3%.