Forex leverage and margin
What is margin?
Margin is the amount required to open a new Forex position. It is not a fee, nor is it a charge to your account. Rather, it serves to ensure that you have a sufficient account balance relative to the size of your position. Margin is the inverse of leverage (described later in this document).
The exact amount traders need in their account to put on a position depends on the size of their position and what instrument they are trading. On our contract specifications page, the amount of leverage required for each position is displayed; margin is simply the inverse of this. For instance, leverage on AUDJPY is listed as 500:1. This means that traders can trade up to 500X the equivalent amount of Australian dollars they have in their account. If a trader puts on a one lot position in AUDJPY (where one lot equals 100,000 AUD) then a trader's margin requirement is 200 AUD. That means that a trader must have 200 AUD (or the equivalent of that amount in another currency) to open a 100,000 AUD position. If the floating value of a trader's account falls below their margin requirement, the broker may close the position.
It is common advice to use leverage with prudence and caution. Significant leverage can just as easily result in great losses as it can in great gains.