Margin and Leverage
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Margin and Leverage
About Margin
When trading with margin, you only need to deposit a certain percentage of the full value of the position to open it. The margin is used to cover any credit risk that arises during your trading. Please note that profits and losses are calculated based on the full value of your position. This means your losses can exceed the actual margin amount deposited.
Within the leverage limits prescribed by product intervention measures, the margin requirement (and associated margin percentage) for each product varies and is displayed on the trading platform. These requirements may change periodically.
Margin Rate
At MDM, the margin requirement per lot is expressed as either a floating amount or a percentage.
For example, using 200:1 leverage, if the price of EURUSD is 1.18992 and a client opens 1 lot of EURUSD (1 lot = 100,000 base currency units), the margin requirement is $594.96 (1.18992 * 100,000 / 200).
The margin requirement for US stocks is a fixed percentage (10%). If Apple Inc. (#AAPL) stock price is $174.54 per share, and a client trades 0.5 lots (1 lot = 100 contracts = 100 shares), the margin requirement is $872.70 (0.5 * 100 * 174.54 * 10%).
As you can see from the examples above, the margin requirement to open a position can be dynamic if it is expressed as a percentage.
Leverage
Leverage is another way of expressing the margin percentage.
Leverage = 1 / Margin Percentage
For example, the margin requirement for #AAPL is 10%. This means the leverage for #AAPL is 10:1.
Please refer to our MDM Contract Specifications for our latest leverage settings.
Leverage will be automatically adjusted based on the above conditions. If there are no open positions, the leverage will revert to the default level. MDM is not responsible if account positions are automatically closed due to these adjustments.
Margin and Leverage
Leverage will be automatically adjusted based on the above conditions. If there are no open positions, the leverage will revert to the default level. MDM is not responsible if account positions are automatically closed due to these adjustments.
Hedging
Hedging is defined as opening trades of equal volume in opposite directions (long and short) for the same instrument at the same time. Regardless of market movements, the client's relative risk is reduced. This requires the client to hold an equal number of buy and sell contracts for the same product. The margin requirement for hedged positions is 0.
Margin Call / Stop Out Level
When the equity in a client's account falls below 50% of the initial margin requirement, the trading platform will automatically liquidate the open orders in the client's account. The platform will close individual positions in the client's account until the account equity is sufficient to support the existing open positions. When deciding which positions to close, the position with the largest loss will be closed first.
Similarly, the margin in your trading account must exceed 50% of the margin for open positions to open a new trade, unless the new trade will partially or fully hedge an existing position.
It is strongly recommanded that clients maintain an appropriate amount of margin in their accounts at all times.