Margin in the Forex market is as important as other frequently used terms. If we want to win in this market, we need to know what the basic financial terms are at a certain level and how they are calculated. If we do not have sufficient knowledge level, then the transactions we do are damaging,
We will examine in detail how to calculate margin and what the margin is.
Click here to open an account and start forex trading immediately.
Margin is the minimum amount of collateral that must be kept in order to open a transaction.
In Forex, whether you are buying or selling transaction in metatrader platform or another, you must have a certain amount of money in your account for each transaction you make. The amount of this collateral varies with the effect of the leverage. Every institution can offer different leverage ratios. You should be able to confirm the leverage ratio you have worked with your company.
How to leverage in Forex is very difficult to be successful on the forex market without having detailed knowledge about forex leverage calculations. For this reason, we will examine in more detail what margin is, how margin is calculated, leverage ratio.
Margin properties;
- The collateral level calculated for each product is different.
- This amount can not be withdrawn during the period when the transaction is open, since the margin amount that must be accounted for in a transaction is kept in the bloke.
- Margin calculation requires knowing the leverage ratio of the products.
- When the margin level is calculated, the amount of lot processed is taken into account.
In the same transaction, margin is not taken because the same amount of Buying and Selling operations are equal to each other.
Let's explain what's in the sample to better understand what the margin is.
Click here to open an account and start forex trading immediately.
For example,
You want to open a 1 lot BUY transaction in EURUSD.
The 1 lot EURUSD transaction actually means an opening of 100,000 euros. (EURUSD contract size = 100,000 units)
If your account has a leverage ratio of 1: 100; The amount of collateral you need to take means 1 in 100 of the transaction volume you make.
100,000 / 100 = 1000 euro margin is required.
So you need to have in your account in order to open 1 lot transaction in eurousd parity is 1000 euro.
If you have deposited 500 USD for Forex trading, you will not be able to open 1 lot EurUsd transaction.
So; If your account has 500 USD and your leverage ratio is 100;
You can open 500x100 = 50,000 USD transactions. This means about 0.50 lots of transaction as lots.
If you open both selling and buying transactions on the same amount ans the same product, no margin will be taken from your account.
MARGIN CALCULATION FORMULA
Margin = Lot x Contract size x Price
Leverage ratio
- Lot: Opened transaction size
- Contract size: contract size for 1 lot process
- Price: The transaction price you want to make
- Leverage ratio: Product leverage ratio
Let's calculate the margins for the Eurusd price 1.06 for the 0.10 lot process (if the leverage ratio is 100)
Margin= 0,10 x 100,000 x 1,06 = 106 usd
100
According to the formula, the margin is in the form of quote currency.
On the trading platforms, this margin account is made automatically by the system. Therefore, many people do not know about this margin account. However, it is important to know how margin is calculated, how much margin is required to open a new transaction, how much margin can be closed without difficulty, Information.
If you have a problem with the subject or if you want the margin to be calculated, you can write us in the comments field.
Click here to open an account and start forex trading immediately.
One of the most curious questions investors seeking to gain by investing in Forex is the profit of brokerage houses. Forex is a sector where competition is very high. For this reason, each forex broker has different advantages, spread rate and campaign. It is important to know how forex brokers make money in order to choose the right brokerage house.It can be said that what we need to pay attention to when choosing a broker is how the corporate earnings policy is.
Click here to open an account and start forex trading immediately.
Earning methods of forex brokers;
1- SPREAD
When trading in Forex, if you are buying, selling price will enter the process, if you are selling buying price will enter the process. So we are paying the cost of BUY and SELLS price difference. Brokers operate like foreign exchange offices. They make money from what we call spread.
When we want to buy dollars in foreign exchange offices, they sell to us from the current dolar exchange rate. Then, by matching the central bank, the difference between the spreads, that is, profit as much as difference.
Forex brokers also earn by working in the same way. The same amount of price they receive from customers is transmitted to large price-issuing banks. If they pay 5 USD to the overseas price provider, they will receive 10 USD spread from the customer. They will make as much profit as the difference on this number.
There is no treasury or trading desk of the brokers that work in this way. They do not risk currency risk by winning only spread.
The trading volume is very high with Forex trading. Therefore the difference paid is quite low.In the foreign exchange offices and in the banks, the transaction volumes are low, so the institutions open the spreads with the desire to earn higher income.
Among the brokerage houses where competition is high, spread rates are the most attractive means of attracting customers. As the institutions that offer transactions in Forex earn the difference between the spread they are paying abroad and the spread it gives to their customers, they can lower the income by giving a low spread to increase the number of customers.Even at the breakeven point, gives a low spread just to catch more customers.
From an institutional point of view, companies operating in this way offer transactions without direct exchange risk by sending orders to direct price providers. Therefore, the more transactions the customers make, the more profits they have. So the broker is not interested in your profit or loss. It is important for them is how often you open transactions.
If we look from customer eyes, we want to work with the lowest spread rates when trading. The less the cost, the better it will be for us to increase our profit. Therefore, we choose the institutions with the lowest trading difference offered to us when we go to the institutional search. However, what we need to be careful about is how companies that provide spreads much lower than average spread rates of all companies should be able to provide this. Working with unsuccessful, unreliable companies in the rest of their services aim to get only a low spread can take us dangerous in a long run.
2-MARKET MAKER
Only brokers that do not want to earn only spreads can take the risk of foreign exchange and prefer the prices themselves. Market makers provides prices through treasury and transaction desk in the institution. Profit from the transactions made by the customer will be at their disadvantages, and it will be advantageous to make losses from the transactions made.
Market makers are profitable if the customer is harmed, and if the customer is profitable they get loss.
We can say that the profits of trading companies with this policy are quite high, as the number of clients making profit by trading in Forex is low.
From a customer perspective, perhaps with better spreading rates, very different orders can be made from the prices in the real market, which in fact can be very damaging than the profits. Or they may not allow the transaction to close when the customer has a profit. The customer may not execute orders. May delay withdrawal requests. At tp / sl levels, the CLIENT can suffer from difficulties.
3-SWAP
We talked about what is swap in forex in our previous article, What is Swap in forex? Brokers can also earn money in the swap as well as spreads. They can earn as much as the difference in the swap ratios according to the financials of their providers.
Customers who do not want to bear the swap cost may go to the swap-free account opening. However, it is beneficial to get detailed information as there may be certain conditions.
Click here to open an account and start forex trading immediately.
One of the most frequently encountered terms when trading on the Forex market is swaps. Let's take a closer look at the swap, which is one of the words we see on the terminal screen, and how the swap is calculated.
Swap is the numerical value which calculated by taking into account the interest rates of the central banks of countries belonging to the pairs of foreign currency transactions.
Click here to open an account and start forex trading immediately.
Features;
1-The swaps are mirrored when we do not close the transaction today and wait the next day.
So if you open the transaction today and close it until 00:00 in the night, the swap is not calculated. If you open your transaction today and close it the next day, the swap is reflected.
Likewise, if you open your transaction today and move it for 1 week, it is reflected in the swap rate.
The swap cost is incurred only if the transaction is moved to the next day. Swaps are not reflected if the transaction is made on the same day as the closing day.
For example, you opened your transaction today at 15:00 pm. If you close your account at 23:00 pm on the same day, the swap will not be reflected. If you close your account at 01:00 am, the swap is reflected.
2-Swaps can be projected plus or minus.
As you know, in the forex market can perform bidirectional transactions. buying is done if the prices are considered to go up, selling is done if it is thought to go down. Whilst swaps are reflected, it is taken into account which direction you are trading.
For example;
If you do BUYING in USDTL, you will pay swap ((-) swap).
If you do Selling on USDTL, you will get a swap ((+) swap).
The reason for this is that the interest rates of the countries belonging to the currencies of the currency pairs differ.
You pay swap when you switch from a higher interest rate country currency to a lower interest rate country currency.
If you switch from a low interest rate country currency to a high interest rate country currency, you will win a swap.
As we mentioned in the example, when you make a BUY at the USDTL, you will get out of the Turkish lira which has a high interest rate and then you will have a low interest rate. In this case, you will have to pay a minus swap if there is a loss of swap.
On the other hand, if you sell USDTL, you will move from the low interest rate Dollar to the high interest rate Turkish lira, which means you will get a swap rate because you are going to high interest rate.
3-Swap payments are calculated for each day including the weekend.
The process you are doing is calculated taking into account the day you move the swab transaction. Days may be different, however.
Forex transactions are processed according to the rule of t + 2 on the day of receipt of takas.So if today is Monday, Takasbank is deemed to have taken place on the Wednesday by Takasbank. Only swap payments are made according to this rule.
Transactions between Monday, Tuesday, Thursday, and Friday, which should be known to the investor, are reflected in the 1 daily swap fee if moved to the next day. The transaction, which is opened on Wednesday, is reflected in the 3-daily swap fee if it is moved to the next day.
The reason for the 3-daily reflection is that it corresponds to the t + 2 rule that we just mentioned.
The day of the 3 day swap may vary depending on the day, institution and product. For this reason, you should get approval from the institution you work for the most healthy information.
On some platforms, the display showing the product properties is giving inform, about the swap paying day.
Because it differs from product to product, you can still see how much swap is reflected on your platform screen.
4-Swaps are calculated in the counter currency.
In Forex, profit and loss is calculated with counter currency. In Forex, swaps is calculated with counter currency too.
So; Assume that USDTL has a swap (-80) for BUY, and a swap (+50) for SALES.
The values mentioned here are in pips for 1 lot.
If you do BUYING for 1 lot in USDTL, it is worth 80 pips. You will pay 80 TL swap fee for 1 lot transaction. If your account is US dollar; The calculated 80TL swap is converted to USD and your account is reflected.
If you do the sales transaction, you will get 50 pips movement, so 50 TL swap. In the same way, if your account is dollar, your swap earn will be transferred to your usd account.
You can calculate the swap prices yourself according to the transaction volume. In the example, if you have traded 0,10 lots, you will pay 8 tl swap fee.
5-Forex has no swapped account.
It is called islamic account which has non-swap accounts are especially preferred by the conservative sector. Those who do not want to see swap + and - in the account can notify the institutions they are working with to ensure that the swap cost is not reflected.
If it differs from institution to institution, you can perform forex trading without pay any swap.Organizations that do not reflect the cost of transportation can supply it from you in different ways too.
For example, if you want to trade without swap fee, instution can increase the spread rates you paid to you. You may be asked to do a certain lot of transactions per month.
In some cases a maximum number of days can be specified for the transaction you are opening. It may be stated that if you do not close at the end of the period, the additional cost will be reflected by the institution.
Therefore; If you want a swap-free account, it is worthwhile to discuss all the conditions with the company in the most detailed way.
Click here to open an account and start forex trading immediately.
Institutions do not have to offer an account without a swap. Therefore, if you have such a preference, you will be able to investigate without opening the account opening process and open an account in the most appropriate institution.
