In Finance, Leverage is borrowing money to supplement existing funds for investments in such a way that the potential positive or negative outcome is magnified and/or enhanced.
For example, trading on leverage is like buying a home. When you want to buy a house with a mortgage, it means you don’t have enough money to buy the property out right. If you put a 20% deposit on a house worth $200,000 and make regular payments to the bank. You are using a smaller amount of money ($40,000) to control a larger asset ($200,000 house).
In Forex, trading on a leverage allows you to lever up your purchases.
As far as Equiti clients are concerned the amount of leverage on their accounts will in part determine the amount of funds they need to put up front for a trade.
Equiti clients have the option of using a system of floating leverage on their accounts. Floating leverage is based on current open positon and will decrease as the size of open positions increases. Equiti’s floating leverage criteria is as follows:
Floating Leverage
Equiti uses a ‘Floating Leverage’ system which automatically applies the maximum leverage available on a trade by a trade basis depending on the client’s trade volume in USD.
Please note that the floating leverage applies to FX and precious metals. There is a fixed leverage on Commodities and Index CFDs.
Nominal value of open position in USD | Maximum leverage offered |
---|---|
First USD 3 Million | 1:500 |
Next USD 3 Million | 1:400 |
Next USD 2 Million | 1:300 |
Next USD 2 Million | 1:100 |
Next USD 5 Million | 1:50 |
Remaining | 1:33 |
- Nominal Value of open position = Number of lots x Contract size
- Example: Open positions over 15 Million USD nominal value, the first 3M will carry a leverage of 1:500, the following 3M carries a leverage of 1:400, the following 2M carries a leverage of 1:300, the following 2M carries a leverage of 1:100, the following 5M carries a leverage of 1:50 and everything above 15M carries a leverage of 1:33.
IMPORTANT:
The nominal value is in the first currency pair, to calculate the required margin you will need to convert the nominal value to USD, then convert the total to your account currency at the current exchange rate.
How to calculate the required margin with the Floating Leverage:
Nominal Value of open position in USD | Maximum Leverage offered | Funds required to open (Required Margin) |
---|---|---|
First USD 3 Million | 1:500 | = 3,000,000 / 500 = 6,000 USD |
Next USD 3 Million | 1:400 | = 3,000,000 / 400 = 7,500 USD |
Next USD 2 Million | 1:300 | = 2,000,000 / 300 = 6666.66 USD |
Next USD 2 Million | 1:100 | = 2,000,000 / 100 = 20,000 USD |
Next USD 5 Million | 1:50 | = 5,000,000 / 50 = 100,000 USD |
Remaining | 1:33 | = XXX / 33 = XXX USD |
Example 1:
You are buying or selling 120 lots of GBPUSD.
Your trading account currency is USD.
GBPUSD spot rate is 1.24562.
- Nominal Value of the position = 120 x 100,000 = 12,000,000 GBP
- Nominal Value of the position in USD = 12,000,000 x 1.24562 (GBPUSD spot rate) = 14,947,440
- The margin required is calculated as per the below:
Nominal Value of open position in USD is: USD 14,947,440 | Maximum Leverage offered | Funds required to open (Used Margin) |
---|---|---|
First USD 3,000,000 | 1:500 | = 3,000,000 / 500 = 6,000 USD |
Next USD 3,000,000 | 1:400 | = 3,000,000 / 400 = 7,500 USD |
Next USD 2,000,000 | 1:300 | = 2,000,000 / 300 = 6666.66 USD |
Next USD 2,000,000 | 1:100 | = 2,000,000 / 100 = 20,000 USD |
Next USD 4,947,440 | 1:50 | = 4,947,440 / 50 = 98,948.80 USD |
Total Required Margin in USD | USD 139,115.46 | |
Total Required Margin on your trading account | USD 139,115.46 |
Since your trading account currency is USD, the required margin for that position is USD 139,115.46.
If your account currency is in a different currency, then you will need to convert the margin required to your account currency.
Example 2:
You are buying or selling 90 lots of EURGBP.
Your trading account currency is CHF.
EURUSD spot rate is 1.02762. USDCHF spot rate is 1.00751.
- Nominal Value of the position = 90 x 100,000 EUR = 9,000,000 EUR
- Nominal Value of the position in USD = 9,000,000 EUR x 1.02762 (spot rate of EURUSD) = 9,248,580 USD
- Margin required is calculated as per the below:
Nominal Value of open position in USD is: 9,248,580 USD | Maximum Leverage offered | Funds required to open (Used Margin) |
---|---|---|
First USD 3,000,000 | 1:500 | = 3,000,000 / 500 = 6,000 USD |
Next USD 3,000,000 | 1:400 | = 3,000,000 / 400 = 7,500 USD |
Next USD 2,000,000 | 1:300 | = 2,000,000 / 300 = 6666.66 USD |
Remaining USD 1,248,580 | 1:100 | = 1,248,580 / 100 = 12,485.80 USD |
Total Required Margin in USD | USD 32,652.46 | |
Total Required Margin on trading your account in CHF | CHF 32,409.07 |
Since your account currency is in CHF, you will need to convert the required margin from USD to CHF.
Total Required Margin on your account: 32,652.46 ÷ 1.00751 = CHF 32,409.07
Example 3:
You are buying or selling 64 lots of XAUUSD (Gold).
Your trading account currency is USD.
XAUUSD spot rate is 1256.80.
- Nominal Value of the position in USD = 64 x 100 x 1256.80 (XAUUSD spot rate) = USD 8,043,520
- The margin required is calculated as per the below:
Nominal Value of open position in USD is: USD 8,043,520 | Maximum Leverage offered | Funds required to open (Used Margin) |
---|---|---|
First USD 3,000,000 | 1:500 | = 3,000,000 / 500 = 6,000 USD |
Next USD 3,000,000 | 1:400 | = 3,000,000 / 400 = 7,500 USD |
Next USD 2,000,000 | 1:300 | = 2,000,000 / 300 = 6666.66 USD |
Remaining USD 43,520 | 1:100 | = 43,520/ 100 = 435.20 USD |
Total Required Margin in USD | USD 20,601.86 | |
Total Required Margin on your trading account | USD 20,601.86 |
Since your trading account currency is USD, the required margin for that position is USD 20,601.86.
Example 4:
If USD is the base currency on a USD account it does not need to be converted.
For example: You are buying or selling 44 lots of USDCAD.
Your trading account currency is USD.
- Nominal Value of the position in USD = 44 x 100,000 = 4,400,000.
- The margin required is calculated as per the below:
Nominal Value of open position in USD is: 4,400,000 | Maximum Leverage offered | Funds required to open (Used Margin) |
---|---|---|
First USD 3,000,000 | 1:500 | = 3,000,000 / 500 = 6,000 USD |
Remaining USD 1,400,000 | 1:400 | = 1,400,000 / 400 = 3,500 USD |
Total Required Margin in USD | USD 9,500.00 | |
Total Required Margin on your trading account | USD 9,500.00 |