Determining Margin

When making a 1 lot currency trade in a mini account, the trade equals 10,000 units of the base currency.  A standard account is 10x the size of a mini, so 1 lot would be equal to 100,000 units of the base currency.  Depending on the broker used, the base currency can be different.  We will use an account held in US dollars for our example.  1 mini lot now equals $10,000.  1 standard lot equals $100,000.  Leverage from the broker enables us to trade large amounts of currency by using the broker’s money.  Using 1:50 leverage, means we only need to have 1/50^th of the amount needed to make a trade.  We have 4 possible scenarios listed below for determining margin, starting with the easiest.

1. With 1:50 leverage, we need $10,000/50 = $200 to make a 1 mini lot trade or $100,000/50 = $2000 for a standard lot trade.  This would be the case for any pair that has the USD as the base currency.  Examples would be USDJPY, USDCAD, USDCHF, and USDMXN.
2. For pairs with the USD as the quote currency, we need to multiply the trade price of the pair by $200 to determine the margin for 1 mini lot or multiply by $2000 for 1 standard lot.  Example of EURUSD with price at 1.35663 x $200 = $271.33 (rounded) for mini or x $2000 = $2713.26 for standard.  Example of AUSUSD with price at .88546 x $200 = $177.09 (rounded) for mini or x $2000 = $1770.92 for standard.
3. For other pairs that do not include the USD, we substitute the quote currency with the USD.  Then take the price of the new pair with the USD as the quote to determine the margin.  Examples of EURAUD, EURJPY, EURCHF would all become EURUSD price x $200 for mini or x $2000 for standard.  Another example would be GBPJPY becomes GBPUSD price x $200 for mini or x $2000 for standard.  Other examples would be AUDCAD, AUDNZD, AUDCHF all become AUDUSD price x $200 or x $2000.
4. The last example we will use will be CHFJPY.  When we substitute the quote currency with USD, the pair becomes CHFUSD.  However, if the price we have contains the USD as the base currency and not as the quote currency, we need to make an extra calculation.  In this example, we need to convert the price from USD as base currency to USD as quote currency.  The USD as base means $1.  We take 1 and divide by the price.  Example 1/.91027 (USDCHF price) = 1.0986 (rounded) gives us the price for CHFUSD where USD is now the quote currency.  This converted price is then multiplied by $200 = $219.72 for mini or by $2000 = $2197.20 for standard to give us the margin amount.