Good afternoon sir..
If we were to trade GBP/JPY (for example, if the price of GBP/JPY = 132.71), if we follow the formula that mas explained,
if we place 1 lot the free margin will become negative, right sir..?
Margin = (100000 X 1 X 132.71) X 1:500
But when I traded GBP/JPY for 0.03 lot with a balance of $200, it was allowed sir.. I use FBS broker
Please explain.. I am a newbie sir, thank you in advance..
Best regards..
To Budisan,
The calculation of margin depends on leverage and the contract size of the pair being traded. For example, let's calculate the margin for GBP/JPY with a size of 0.03 lot using a leverage setting of 1:500.
^ Specifically for cross pairs, the running price used for margin calculation is the running price of the base currency. In this case, for the GBP/JPY pair, the base currency is GBP/USD.
That is why you are allowed to open a GBP/JPY position of 0.03 lot with a USD 200 balance because the margin required to open that position is only USD 7.90.
Hope this helps.
@ Budisan:
To calculate the margin for the GBP/JPY cross pair, the current GBP/USD price must be known.
Formula: Margin = (USD 100,000) x (number of lots or volume) x (margin percentage) x current GBP/USD price.
For example: current GBP/USD price = 1.2500, then Margin = USD 100,000 x 0.03 x 0.2% x 1.2500 = USD 7.50.