What is Margin and how does it affect me?

Amplify your trading exposure with the power of leverage

Trading on Margin (or with Leverage) allows you to execute trades far greater in size than your initial deposit, allowing you to magnify the price movement effect. This can work both FOR and AGAINST you so it is important that the you take care when selecting the amount of leverage to employ on your trading account.

If you set your account to an initial leverage of 1:200, it is the equivalent of trading on a 0.5% margin. For example, you would be able to speculate and buy 20,000 USD notional in your
trading terminal with only 100USD deposit in your account etc. (Leverage may be increased to
a maximum of 1:400 on special request).

The minimum margin required to open a position depends on the chosen leverage,
currency pair, prevailing market prices and account type.

How is Margin calculated?

The below metrics will better help to explain the calculations which
are used in the trading platform



Account Balance The amount of funds you have deposited in your account
Net Equity Account Balance + unrealised profit - unrealised loss
Exposure Total value of the position opened
Margin Requirement %'age of the Exposure needed as equity to open a Position
Used Margin Exposure x Margin Requirement
Free Margin Net Equity - Used Margin
Margin Utilisation % (Net Equity / Used Margin) x 100



Margin Calls and Stop Out Levels

To protect both you and the credit exposure we face as a company, VARIANSE will enforce a Margin Call when your Margin Utilisation is less than or equal to the Margin Call Level. This will be via an indication on the trading platform, and provides you with the opportunity to deposit more funds or close out some of your losing positions.

Under this circumstance, you can only execute trades that reduce the trading exposure by closing or hedging existing net positions. You will not be able to open any new positions which may increase your trading exposure, until your Margin Utilisation rises above the Margin Call Level again.

Automatic Stop Outs and forced closing of positions will occur typically in the following scenarios:

- If your Margin utilisation drops below the Stop Out Level.

- If you remain on margin call constantly for 24 hours

- If you are on margin call going into the weekend

- If you are on margin call during periods of increased volatility, or periods when we anticipate
  increased volatility

- We’ll try to avoid having any accounts on margin call going into the weekend. So if your equity
  is below 100% of your margin requirement, your positions will be at an increased risk of being
  closed on a Friday evening.

- Our margin requirements are subject to change. If they increase on one or more of your
  positions then your current equity may not be enough to keep positions open.

Finally, it is important to remember that we could close you out at any time during margin call.



Example

Trading Single Currencies on MetaTrader 4


Account Balance $25,000
Buy EUR 2 million (20 LOTS) EURUSD at 1.20000
Margin Requirement 1% (1:100 leverage)
Exposure $2,400,000
Used Margin $2,400,000 x 0.01 = $24,000
Margin Utilisation ($25,000 / $24,000) x 100 = 104%
Margin Call / Stop Out Level 100% / 50%

1. Now the position suffers a floating loss of -$1,000,
    so Net Equity = $25,000 - $1,000 = $24,000


2. Margin Utilisation now equals ($24,000/$24,000) x 100 = 100%


***A MARGIN CALL IS ISSUED***


3. The position continues to move against you and the total loss is now -$13,000,
    so Net Equity = $25,000 - $13,000 = $12,000


4. Margin Utilisation now equals ($12,000/$24,000) x 100 = 50%


***FORCED STOP OUT OCCURS ON THE LARGEST LOSING INDUVIDUAL POSITION***


Leverage to Margin calculation

The following table illustrates each leverage level and its corresponding margin requirement If you would like to calculate the values yourself the folliwng formula should be used:

Leverage = (X/Y * 100)

(where Leverage is specifed in a X:Y format)

Leverage Margin
1:10 10.0%
1:20 5.00%
1:50 2.00%
1:100 1.00%
1:200 0.50%
1:300 0.33%
1:400 0.25%







Margin Call / Stop Out Levels

Account Margin Call Stop Out
LatentX
Classic
100% 50%*
LatentX
ECNpro
100% 50%*
LatentX
PRIME
100% 100%*

Margin Call and Stop Out Levels may not necessarily follow the %'age levels in the table above, and may be raised to 100% or higher depending on market conditions, and / or after an assessment on the risk profile of a clients account. We will inform you if there any changes from the default Margin Call and Stop Out Levels.