Hello, I am new to trading and a bit confused, specifically when it comes to margins. My question is Do margins add up,
Let’s say I have $500 in my trading a/c, using a leverage of 10:1, and I enter a micro lot(1,000 units) position in EUR/USD. Say my margin required is 10%($100). Now, if I was supposed to enter an AUD/USD micro lot position does the initial $100 cover both these positions?
In other words, do I now need a minimum of $200 in my a/c to keep my positions open?
Each position requires its own margin.
If you open a one-micro-lot position in EUR/USD, in a USD-denominated account, the notional value of that position will be 1,000 units x the current price of EUR/USD – which, at this moment, happens to be:
1,000 x 1.1273 = $1,127.30. If the relevant margin percentage is 10%, as in your post, then the margin amount for this trade will be $112.73
Each additional position which you enter will require margin based on its notional value.
For the AUD/USD trade you inquired about, the notional value of one micro-lot, at current prices, is
1,000 x 0.6479 = $647.90. If the required margin percentage for this pair is also 10%, then the margin amount required to open the trade will be $64.79.
Based on these prices, opening both positions will require initial margin of $112.73 + $64.79 = $177.52.
Be aware that after you satisfy the initial margin requirement, and open your trade, initial margin is replaced by maintenance margin (the margin required to remain in your trade). Maintenance margin is normally less than initial margin – typically only 50% of initial margin. Check your broker’s Terms and Conditions to find out exactly what maintenance margin is required in your account.
thanks bro, this was extremely informative and helpful, i could kiss u on the lips rn. no homo