Help CenterWhat is Leverage and Margin Trading?
Margin trading allows you to trade larger positions in the market by using leverage. Instead of paying the full value of the trade, you only need to deposit a fraction of it, known as the 'margin'. This enables you to amplify your potential profits (but also increases risks). At Liquid Brokers, we provide margin trading on all available instruments.
How is Margin Trading Different from Trading Without Leverage?
Without Leverage: You must pay the full value of the position upfront. For example, to trade $10,000 worth of an instrument, you need $10,000 in your account.
With Leverage (Margin Trading): You only need to deposit a small percentage of the total position size, called the margin. For instance, with 1:500 leverage, you only need $20 to control a $10,000 position. This frees up capital for other trades and allows you to maximize your trading potential.
What Leverage is Applied to Different Asset Classes?
Below are the leverage settings for different asset classes:
* All Liquid Charts accounts have leverage set automatically to 1:500 for Forex instruments. Other asset classes will follow the leverage settings listed above. For MT5 accounts, leverage can be selected between 1:100 and 1:500. If a lower leverage is chosen (e.g., 1:100), any instrument with a higher default leverage will be capped at the selected leverage.
How Do I Calculate Margin Requirements?
At Liquid Brokers, we make it easy for you to calculate margin requirements. The platform already provides the Contract Size, so you can use the following formulas:
Forex: Margin Requirement = Contract Size × Lot Size / Leverage
Example of the Margin Required to Trade Forex Instruments
To trade 1 lot of EUR/USD with a leverage of 1:500:
- Contract Size: 100,000
- Lot Size: 1
- Leverage: 500
Margin Requirement: 100,000 x 1 / 500 = EUR 200 of free margin required.
The margin requirement for a currency pair is always in the base currency (the first currency in the pair). For EUR/USD , the margin will be in EUR. However, Liquid Brokers automatically converts this into your account's currency.
If your account is in USD and EUR/USD is quoted at 1.0500 , the margin in EUR will be converted to USD. Example: 200 EUR × 1.0500 = 210 USD.
Non-Forex: Margin Requirement = Contract Size × Lot Size x Price / Leverage
Example of the Margin Required to Trade Non-Forex Instruments
To trade 1 lot of SPX500 at a price of 6,100 with a leverage of 1:200:
- Contract Size: 10
- Lot Size: 1
- Leverage: 200
- Price: 6,100
Margin Requirement: 10 x 1 x 6,100 / 200 = USD 305 of free margin required.
To trade 1 lot of BTCUSDTPERP at a price of 95,000 with a leverage of 1:100:
- Contract Size: 1
- Lot Size: 1
- Leverage: 100
- Price: 95,000
Margin Requirement: 1 x 1 x 95,000 / 100 = USD 905 of free margin required.
How Do I Find the Contract Size?
You can find contract size information in our Available Instruments and Specifications FAQ or in the instrument specifications for Liquid Charts or MT5 FAQs
How Do I Know My Available Margin?
On your trading platform, you'll see 'Used Margin' and 'Free Margin' in your account info. Used Margin is the collateral for your open positions, while Free Margin is the remaining margin for new trades. It’s calculated as Account Equity (balance + or - profits/losses) minus Used Margin.
For more details, refer to our FAQ on Margin Call and Stop-Out Levels. Always monitor your margin to trade responsibly.
Related FAQs
- Margin Call and Stop Out Levels
- Commission Information
- Available Instruments and Specifications
- Lots, Pips, and Profit&Loss