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NSFX Margin requirements

Forex Margin
Requirements

Forex Margin Requirements

All foreign exchange accounts operate with margin. Having a clear understanding of what margin requirements are is essential when engaging in foreign exchange market transactions. The margin itself represents the amount of money needed by the broker from a trader, upfront, in order to secure, and guarantee a leveraged position on behalf of the trader, in the market.

The actual amount required is calculated by the amount of leverage the individual trader intends to trade with. The requirement is a minor % compared to the actual dollar value of contract it represents in the open market. Margin is the collateral put up that limits the brokerage’s exposure and allows the individual to benefit greatly from leveraged positions. There are risks, as with all trading, but with margin in place these risks are minimized. If the trade closes in profit, the margin is returned to the trader along with profit. If the position closes in a loss, the trader forfeits the margin to the broker.

As a result, in order to open a new position the trader must maintain the Minimum Margin Requirements at all times, if not the risk to both parties would be unmanageable. NSFX Ltd. offers leverage of both 1:100, and 1:200 which translates to margin requirements of 1.0% and 0.5% respectively.

Margin Calls

If a Trader’s Equity should, at any time, equal or fall below 20% of the Used Margin for a Trader’s Account in total. NSFX Ltd. will liquidate any part of or all Open Positions in a Customer’s Account. Closure of positions will be done on the basis of best execution prices available to NSFX Ltd. at that time. NSFX Ltd. at its best effort will attempt to contact the trader with an Equity Notification if an individual’s Equity should, at any time, equal or fall below 20% of the Used Margin.

Margin Requirement Example

Beyond basic explanations, it is important to understand how margin operates in a regular trading environment. The clearest way to understand this is by going through the calculations involved. Margin requirement is calculated by the leverage of the instrument (0.5% or 1:200, 1.0% or 1:100) and the USD value of the position.

Now, let’s take a 10,000 EUR/USD (“Mini-Lot” or 0.1 Lots) position bought at price of 1.2500. The USD value of the position will be: 10,000 X 1.2500= 12,500 USD. With a margin requirement of 1.0% (1:100 leverage) the result will be 125 USD required to keep the position open.

Let’s take a 10,000 EUR/USD(“Mini-Lot” or 0.1 Lots) position bought at a price of 1.2500. The USD value of the position will be: 10,000 X 1.2500 = 12,500 USD. With a margin requirement of 0.5% (1:200 leverage) the result will be 62.5 USD required to keep the position open.

Standard Lot
(units 100,000) 1.0 Lot
Mini Lot
(units 10,000) 0.1 Lots
Micro Lot
(units 1,000) 0.01 Lots

* The above illustrations are mere fictitious examples and are not to be construed in any way to constitute investment advice.

Margin requirements may change from time to time. In order to prevent any confusion, NSFX Ltd. , will always make its best effort, and will inform traders about any projected changes on Margin Requirements via email or phone at least a week in advance of Margin Requirement Changes. NSFX Ltd. has the right to liquidate any or all Open Positions whenever the Minimum Margin Requirement is not maintained.

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NSFX is regulated by the Malta Financial Services Authority (License Number IS/56519). RISK WARNING: Trading in Forex and Contracts for Difference (CFDs), which are leveraged products, is highly speculative and involves substantial risk of loss. It is possible to lose all your capital. Your capital is not guaranteed and may go down as well as up. Therefore, Forex and CFDs may not be suitable for all investors. Only invest with money you can afford to lose. So please ensure that you fully understand the risks involved. Seek independent advice if necessary. NSFX Ltd. does not provide its services to citizens of the US.Copyright © 2012-2017 NSFX All Rights Reserved. |
* Prices displayed on the website may be affected by changes in currency exchange rate and price movements thereby affecting your investment return therefrom.
NSFX Ltd is registered in Malta, 168 St Christopher Street, Valletta VLT 1467, MALTA | Company Registration Number: C/56519 MFSA License Number: IS/56519