What is margin?
Margin can be thought of as a good faith deposit required to maintain open positions. This is not a fee or a transaction cost, it is simply a portion of your account equity set aside and allocated as a margin deposit. Margin requirements (per 1k lot for FX and 1 Contract for CFDs) are determined by taking a percentage of the notional trade size plus a small cushion. A cushion is added to help alleviate daily/weekly fluctuations.
CFD Margin Requirements (Includes Indices, Commodities, and Treasury Instruments)
Up-to-date margin requirements are displayed in the "Simplified Dealing Rates" window of the Trading Platform by instrument.
You can read more about margin and how it works at www.fxcm.za.com/forex/trading-details/. Please be advised that trading on margin carries a significant risk of loss and is not suitable for all investors.
Trading on margin can both positively and negatively affect your trading experience as both profits and losses can be dramatically amplified.
Why trade on margin?
Trading on Margin (Trading with Leverage) is a common attraction of the forex market. It allows you to open trades that are larger than the capital in your account.
In the example above, $1,000,000 have been purchased through a long USD/JPY position with a $50,000 account balance (20:1 Leverage).
Trading on margin can both positively and negatively affect your trading experience as both profits and losses can be dramatically amplified. Trading foreign exchange with any level of leverage may not be suitable for all investors.
What are the CFD margin requirements for FXCM UK?
FXCM CFD margin rates for each instrument are displayed in the dealing rates window on the Trading Station and in the Product Guide.
What are the forex margin requirements for FXCM UK?
Forex margin requirements at FXCM UK vary depending on account type. Up-to-date requirements are displayed in the “Simplified Dealing Rates” window of the Trading Station by currency pair. Standard Accounts are set to an approximate 1% margin requirement on major currency pairs. Mini accounts are set to an approximate 0.25% margin requirement on major currency pairs.
Why does FXCM encourage lower leverage?
When you use excessive leverage, a few losing trades can quickly offset many winning trades. To clearly see how this can happen, consider the following example.
- Scenario: Trader A buys 50 lots of USD/JPY while Trader B buys 5 lots of USD/JPY.
- Questions: What happens to Trader A and Trader B account equity when the USD/JPY price falls 100 pips against them?
- Answer: Trader A loses 41.5% and Trader B loses 4.15% of their account equity.
Trader A Trader B Account Equity $10,000 $10,000 Notional Trade Size $500,000 (Buys 50, 10K lots) $50,000 (Buys 5, 10K lots) Leverage Used 50:1 (50 times) 5:1 (5 times) 100 Pip Loss in Dollars -$4,150 -$415 % Loss of Equity 41.5% 4.15% % of Equity Remaining 58.5% 95.85%
By using lower leverage, Trader B drastically reduces the dollar drawdown of a 100 pip loss.
Where can I view FXCM's up-to-date margin requirements?
You can view up-to-date margin requirements listed by currency pair in the MMR column of the "Simple Dealing Rates" window within the platform. Margin requirements are subject to change without notice based on price fluctuations.