The difference between Required Margin and Margin Requirement

Trading Discussion
1

Can someone explain the difference between Required Margin and Margin Requirement?

I could’ve sworn i’ve read that required margin is the amount of money that is set aside and locked up by the Forex brokers and is required to open a trade.

While for margin requirement, It is expressed as a percentage of the full position size, or notional value of the position you want to open which tells me that’s the money u need to open a position.

Can you guys walk me through with those two terms? I would appreciate it. Thank you.

2

Margin requirement is a % and it is fixed, it depends on the leverage that you have with your broker.

Leverage - Margin Requirement

1:1 - 100%
1:2 - 50%
1:5 - 20%
1:10 - 10%
1:50 - 2%
1:100 - 1%
etc.

What does that mean? You want to open a position with your broker for $250? In means that, if you have no leverage (so 1:1), you have to guarantee the whole $250 (100% margin requirement) with your own deposited money. If you want to open the same position with a leverage of 50:1, you have to guarantee 2% of $250 with your own deposited money, so $5.

The required margin is the $ that you have to guarantee to your broker for a position that you open. In the previous two examples, the required margins were $250, for the position without leverage, and $5, for the position with leverage of 50:1.

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3

Margin is the amount of money broker use as a collateral to open a position for you on the interbank market.

The amount depends on the leverage you are using.
If you have leverage 1:100, using 1 standard lot, 100 000 units, on USD account with USD/CAD trading pair, margin would be:

Margin Requirement = ([BASE Currency / Account Currency] x Units) / Leverage
Margin Requirement = (1USD/1USD) x 100,000/100 = 1,000

This means if you have $10,000 on your trading account broker will use $1,000 and lock it until the trade is closed.

This margin amount is increased each time if you add more trades to this one because broker needs more money as a collateral.

Required margin or margin requirement is just a way of expresion, in units or percent.

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