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
More on Beginner's Education
What are Base and Quote Currencies?
In forex, currencies are always traded in pairs. The first currency is called the base currency and the second currency is called the quote currency. For example, EURUSD, means that the base currency is the Euro and the quote currency is the US Dollar. The quote...
What are the “Major” trading currency pairs?
What are Crosses?
What are Exotics fx pairs?
Exotics are currency pair groups that involve either a currency from an emerging economy either a currency from a small country with a small developing economy. Examples would include US Dollar Mexican Peso (USDMXN), US Dollar South African Rand (USDZAR), US Dollar...
