Forex deposit
When trading Forex, there are several important indicators that characterize a transaction with currency; one of the most important is the Forex collateral, which is the trader’s own funds.
Forex collateral is the margin security of a transaction, that is, the amount that must be in the trader’s account to open a new transaction, taking into account leverage. For calculations, the “Free Funds” indicator in the trader’s trading terminal is used.
It is this indicator that serves as the main guideline when determining the volume of opened orders on Forex; it can change depending on what currency pair is being traded. Therefore, when calculating collateral, you should focus not only on the planned volumes, but also on the base currency in the currency pair.
Forex margin calculation.
To calculate the amount of margin security, several options are used depending on the type of currency pairs.
1. Basic – if the main currency in a currency pair is the US dollar, then when making calculations we use two indicators: transaction volume and leverage.
For example , to open a transaction on the USD/CHF currency pair with a volume of 1 lot, using a leverage of 1:100, we will need 1000 US dollars.
As the leverage decreases, the amount of required collateral in Forex will increase accordingly. 2. Quoted - in the same case, if the dollar acts as a quoted currency in a currency pair, the calculation should be carried out taking into account the current quote rate.
For example , to open a transaction of 1 lot on the GBP/USD currency pair with the current rate of 1.5200, it already costs 152,000 US dollars.
The reason is that the amount of collateral is calculated depending on the volume of the transaction, and although it is always 100,000 units of the base currency, it is always different due to the difference in rates.
After all, you cannot compare the cost of 100 thousand pounds sterling and 100 thousand Japanese yen. 3. Cross currencies - as for cross currencies, we already focus on the exchange rate of the base currency against the US dollar.
For example , forex margin on EUR/GBP is calculated taking into account the value of the euro against the dollar, and if the quote is 1.3545 dollars per euro, then to open a transaction of one lot with a leverage of 1:100 we will need 1355.5 US dollars .
Sometimes in the trader's trading terminal you may find that the amount of the deposit does not match the calculated one, this fact is due to the fact that some brokers, after opening an order, use a smaller part of the required funds on the Forex deposit, freeing them up to open new orders.