Complete Guide to Forex Margin Trading: From Basic Concepts to Risk Management

2026-01-06 18:07:54

What is Margin? Understanding the Core Concept

In forex trading, margin refers to the funds that traders need to deposit and maintain their positions. Unlike other financial instruments, forex margin is not a loan from the broker but a form of collateral or deposit used to ensure that both parties can fulfill their contractual obligations.

For example: If you want to buy a USD/JPY contract worth 100,000 USD, you don’t need to pay the full amount. Instead, you only need to deposit a portion based on the margin requirement set by the broker. If the margin requirement is 2%, then you only need $2,000 to open this position.

What is the Margin Ratio? How Does It Affect Trading?

Margin ratio refers to the ratio between the required margin and the actual trading amount when opening a forex position. This ratio is set by the broker and may vary depending on the country, regulatory body, or trading instrument.

Common margin ratios include:

Currency Pair	Margin Requirement
EUR/USD	0.25%
GBP/USD	0.5%
USD/JPY	1%
AUD/USD	2%

It is advisable to check the current margin ratio before placing an order, as the ratio may be adjusted in real-time based on market conditions by the same broker.

What is the Initial Margin?

Initial Margin is the amount of margin that traders need to deposit when opening a new position. This is the initial capital that must be provided to the broker when engaging in leveraged trading.

How is the initial margin calculated?

The calculation formula varies depending on whether the base currency is the same as the account currency:

When the base currency is the same as the account currency:

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