What is Leverage and Margin? How does It Impact your Trading on Exness

Leverage and Margin

Want to know everything about our leverage and margin requirements? In this article you will learn about:

What is leverage?

Leverage magnifies a trader’s buying power by giving them the ability to trade large volumes even with a small amount of deposited funds. It is expressed as a ratio of the trader’s own funds to borrowed funds, e.g. 1:200, 1:2000 or 1:Unlimited.

The maximum leverage you can use when trading the majority of forex currency pairs depends on your trading terminal:

• For Standard, Standard Plus, Standard Cent, Pro, Zero, and Raw Spread accounts on MT4: 1:Unlimited
• For Standard, Standard Plus, Standard Cent, Pro, Zero, and Raw Spread accounts on MT5: 1:2000

The amount of leverage varies as it depends on your account equity and other factors outlined below.

Unlimited leverage

Unlimited leverage allows you to trade with negligible margin, thereby allowing you to open bigger positions and try different strategies. The exact ratio for Unlimited Leverage is 1:2 100 000 000. It is available on our Standard, Standard Cent, Standard Plus, Pro, Raw Spread and Zero accounts when trading on MT4*.

Unlimited Leverage is more suitable for experienced traders as it carries higher risks and may lead to greater loss of capital. To make Unlimited Leverage available, we have the following prerequisites and conditions:

• The trading account must have equity of less than USD 1 000.
• The trader must have closed at least 10 positions (excluding pending orders) and 5 lots (or 500 cent lots) across all real accounts in your Personal Area.

You can select Unlimited Leverage in your Personal Area. However, the Unlimited Leverage option will only be unlocked when all the prerequisites are met.

*On MT5, the maximum permissible leverage for all instruments and groups is 1:2000.

Leverage requirements

Whenever you have Unlimited Leverage selected, your maximum available leverage will automatically change to when your accounts equity exceeds a certain amount. Below is a handy table outlining these levels of leverage requirements, and how much equity triggers them:

Equity	Maximum available leverage
USD 0 - 999 (MT4 only)	1:Unlimited
USD 0 - 4 999	1:2000
USD 5 000 - 14 999	1:1000
USD 15 000 - 29 999	1:600
USD 30 000 - 59 999	1:400
USD 60 000 - 199 999	1:200
USD 200 000 or more	1:100

Please note that Unlimited Leverage is not available for financial instruments belonging to Exotic, Crypto, Energies, Stocks and Indices instrument groups. The margin for these instruments is held in accordance with the instruments’ margin requirements and is not affected by Unlimited Leverage.

Dynamic margin requirements

For the majority of the trading instruments, margin requirements are dynamic, meaning that they change once the leverage changes—the bigger the leverage, the smaller the margin requirements, and vice versa. Factors such as publication of important economic news, and trading before weekends and holidays can also affect margin requirements.

Leverage automatically changes in these scenarios:

• When your account equity changes
• During the publication of important economic news
• Before weekends and holidays
• Thirty minutes before the daily market break (for Gold trading)
• Thirty minutes before market closing and within twenty minutes after market reopening for Stocks on company financial report announcement dates.
• The daily market closing and opening for Stocks will result in high margin requirements if an order is opened during the periods before and after market closing, unlike announcement of financial reports which result in high margin requirements regardless of when the position was opened.

Verify the margin requirements for your instrument for yourself with the help of our Trader’s Calculator.

Fixed margin requirements

Margin requirements for some instruments are fixed, regardless of the level of leverage you use. These financial instruments belong to Exotic, Crypto, Energies, Stocks and Indices instrument groups. The margin for these instruments is held in accordance with the instruments’ margin requirements and is not affected by Unlimited Leverage.

How to calculate margin

Whenever you want to place a trade, it is extremely important to make sure that you have sufficient funds in your account to open the position and keep it open. We covered this in one of our other articles.

So, how do you calculate margin?

Keep in mind that margin is calculated differently for different trading instruments. As such, for the majority of trading instruments we offer at Exness, the margin is calculated according to the leverage you are using. However, there are some instruments for which margin requirements are fixed, regardless of the leverage you use.

Margin requirements that depend on leverage

Margin = Lots x Contract Size / Leverage Size

Let’s take 2 lots of EURUSD as an example, with leverage of 1:2000.

• Lots: 2
• Contract size: 100 000 EUR
• Leverage size: 2000

Margin = 2 x 100 000 / 2 000 = 100 EUR (margin is always calculated in the base currency).

Margin requirements that do not depend on leverage

Margin = Lots x Contract size x Required margin

Let’s use 0.5 lots GBPSEKm.

• Lots: 0.5
• Contract size: 100 000 GBP
• Required margin: you can find this in our Contract specifications. In this example the required margin is 1%

So,

Margin = 0.5 x 100 000 x 1% = 500 GBP

It’s always good to know the ins and outs of how things are calculated, but what could be better than a tool that can calculate it for you in a second? Whenever you need to calculate margin and other related figures, just use the Trader’s Calculator.

How does Leverage Impact your Trading

Within forex, a sudden stop out can be an incredibly frustrating thing to happen. However, risk management techniques can help you test various trading conditions in order to be better prepared. Let’s look at how your leverage impacts your stop out and how you can better control this.

How does stop out work?

When your margin level (more on this later) reaches a certain percentage, in most cases 0%, Stop out automatically closes that position. Margin call, which is similar except that it doesn’t automatically close your positions and only warns you of your position’s downturn, will occur sooner at 60% margin level.

What is the margin level?

The margin level is a percentile that tracks both your margin and your equity, and it is calculated:

Equity/Margin x 100 = margin level

So, if your equity is $1000 and your margin is $100 your margin level will be 1000%.

1000/100 x 100 = 1000%

So when this percentile hits 0% stop out automatically closes your positions, starting with the least profitable one. It will only stop closing positions when doing so results in a margin level above the amount set as stop out.

When would stop out occur?

At the time I place the order, my margin level is calculated this way:

• 1000/40 x 100 = 2500% (the margin level is 2500%).

But now my position starts falling, and my equity drops accordingly; let’s say to $500.

• 500/40 x 100 = 1250% (the margin level is now 1250%).

Still not enough to cause stop out, but the margin level has been halved. Bad news, the position has taken a major downturn and your equity falls to $1.

• 1/40 x 100 = 2.5% (the margin level is now 2.5%)

Still not enough to trigger stop out, but very close. Your position goes into the red and your equity now stands at $0.

• 0/40 x 100 = 0% (the Margin Level is now 0%).

Stop out occurs immediately and this position will be liquidated automatically.

What about leverage?

Leverage changes the initial held margin amount as well as your equity, and it’s there that it can impact stop out. Leverage is a means by which a trader’s buying power is enhanced by a set rate: 1:200, 1:500, etc. 1:200 meaning that for every $1 you put into your Margin, it will be magnified by 200. This is useful for trading large volumes with little Margin, but with it also comes a higher potential risk as positions tend to be more volatile.

Leverage and stop out meet in the margin level.

The volatility is key here.

• The higher the leverage, the lower your margin, the more responsive to change your position is.
• The lower the leverage, the higher your margin, the less responsive to change your position is.

A higher leverage speeds up the rate at which margin level changes compared to lower leverage.

The stop out for both positions above will result in the same amount of loss, but the rate at which stop out occurs is faster with higher leverage since it is more volatile.

This often overlooked aspect must be taken into account for comprehensive risk management.
 

How does News Releases impact to Leverage

When a trading instrument is affected by a high importance news, the leverage on currency pairs involving that instrument is capped at 1:200. Let us learn more about this.

Impact

In case of a high importance socio-economic news affecting a trading instrument, for all orders opened on currency pairs involving the said instrument 15 minutes before the news release and 5 minutes after, margin will be held at a maximum leverage of 1:200.

This is done to reduce traders risks if the market situation develops unpredictably during these significant economic events.

Once this period has passed (5 minutes after the news release), margin is recalculated based on the amount of funds and the leverage set on the account.

Example

Let us say there is the following news release for USD:

12:30 USD Personal Consumption Expenditure Core (YoY) High

This means that between 12:15 GMT+0 and 12:35 GMT+0, any new orders opened on currency pairs involving USD will have margin held at a maximum leverage of 1:200.

Please note that if there are several news events close to each other, higher margin requirements could be extended for a longer period.

Let us say the below mentioned news are set to release today.

12:30 USD PCE Core (YoY) High

12:30 USD Personal Consumption Expenditure Core (YoY) High

13:00 EUR German Consumer Price Index (YoY) High

Instead of increasing the margin requirements two times from 12:15 to 12:35 GMT+0 and then again from 12:45 to 13:05 GMT+0, the requirements are increased for one extended period of time of 50 minutes: from 12:15 to 13:05 GMT+0.

How are clients notified?

Clients are notified via an email sent to their trading platform (Mailbox Tab) 45 minutes prior to the news release to indicate the time and currencies affected by the news.

Where can clients check regarding such news?

Clients can keep track of news releases by checking the Economic Calendar on our website. A red flame symbol beside the news indicates high importance.

You can also filter news based on the currencies you trade in.

Gold Leverage restrictions

All new XAU (gold) positions opened in the thirty minutes before the daily break will be subject to increased margin requirements with leverage being capped at 1:1000.

This is a risk management measure designed to help protect you from possible high volatility after the daily break, which could result in sudden market movements and potential loss of capital.

• High margin requirement periods are:

Summer: 20:29 to 20:59 GMT

Winter: 21:29 to 21:59 GMT

• The daily market break for XAU is from 20:59 to 22:01 GMT (Summer) and 21:59 to 23:01 GMT (Winter)

Margin Call and Stop Out levels for the various Exness account types

Here is everything you need to know about the Margin Call and Stop Out levels for the various accounts we offer, at a glance:

Account	Margin Call	Stop Out
Standard Cent	60%	0%
Standard	60%	0%*
Pro	30%	0%*
Zero	30%	0%*
Raw Spread	30%	0%*

*During daily break hours for Stocks, the stop out level is changed to 100%. This means that clients’ orders that remain open during the break on the stock market, may be closed by stop out when the margin level reaches 100%.

Stop Levels

When setting up pending orders in Standard Cent, Standard, Pro, Zero, and Raw Spread accounts, it is required of you to maintain a certain minimum distance from the current price. This distance is called Stop Level, and it has already been pre-defined for all currency pairs.

Note that in case the current spread is greater than the specified stop level for an instrument, the distance to be maintained should be greater than the current spread.

Let us look at a simple example to understand this:

Assume you want to place a Buy order and set a Stop Loss for it. Prices at the moment are: 1.13831/1.13842

Current spread is 1.1 pips

Stop Level is 1.2 pips.

When comparing these two parameters, we always choose the higher number. Thus, a minimum of 1.2 pips distance from the current price is to be maintained when setting up Stop Loss.

The closest price for Stop Loss = Current Bid price - Stop Level (1.2 pips)

= 1.13831 - 0.00012

= 1.13819

In case you want to set Take Profit, you should add the Stop Level pips instead of deducting them.

The closest price for Take Profit = Current Bid price + Stop Level (1.2 pips)

= 1.13831 + 0.00012

= 1.13843