Understand the concept of margin trading in online trading

What is Market Margin? Let’s Get a Clear Understanding

When you start trading with leverage, the first thing to understand is margin — not a fee. It is the collateral that your broker holds in your account to allow you to control larger trading positions.

For example, if you want to control a $100,000 position and the broker sets a margin rate of 1% (leverage 100:1), you will only need $1,000 as collateral. This amount will be “locked” in your account as long as your position remains open.

The Difference Between Initial Margin and Maintenance Margin

Initial Margin (Initial Margin) is the amount you need to provide to open a position. Meanwhile, Maintenance Margin (Maintenance Margin) is the minimum amount you must keep to keep your position open.

Think of it like this: the initial margin is the entry fee for trading, while the maintenance margin is the minimum level you must maintain to avoid having your position closed.

How to Correctly Calculate Margin

The formula for calculating initial margin is quite straightforward:

Margin = Current Contract Value × Margin Ratio (%)

Real example: Suppose you open a mini lot position (value $10,000) with 200:1 leverage (margin rate 0.5%). You will only need a margin of $50 $10,000 × 0.5%(.

Maintenance margin can be calculated with this formula:

Maintenance Margin Ratio )%( = Margin Ratio )%( × 50%

So, if the initial margin is 0.5%, the maintenance margin will be 0.25%.

Margin Levels and the Risks Involved

When your trade incurs losses, the funds in your account decrease. If the maintenance margin in your account falls below the set level, the broker will issue a Margin Call )request for additional collateral(.

For example: You deposit an initial margin of $1,000 and must maintain a maintenance margin of at least ). If your position incurs losses and your account balance drops to $500 , you will need to add more funds $400 to keep your position open.

If you do not add funds in time and your position decreases further, the broker has the right to automatically close your position to prevent further losses.

Summary: What You Need to Remember

• Margin is the collateral in your account, not a fee.
• Margin trading allows you to trade larger sizes with less capital.
• Initial Margin = the amount needed to open a position.
• Maintenance Margin = the minimum funds to keep your position open.
• Leverage and margin amplify both profits and losses. Remember, the risks are real and significant.