Free Margin in forex trading in its simplest definition, is the money in your trading account that is available for trading. It is calculated by using the formula: Free Margin = Equity – Margin (of open positions). Let’s look at a relevant example. A trader enters a trade with the following conditions: Decides to buy 2 lots of EURUSD at the exchange rate of 1.20000, so the transaction will amount to 240 000 US Dollars. The required margin for this position is calculated as follows. €240 000 divided by 50. If after entering this trade, the price of EURUSD fell to 1.19050, he incurred a loss of 0.00950 pips. Which equals to €2280 (240 000 x 0.00950). In this case, the trader’s Free Margin would be: Free Margin = (10 000-2280) – 4800. Free Margin = €2920
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