**Margin**

Margin – a term used in trading, exchange, insurance and banking practice to indicate the difference between the prices of goods, securities rates, interest rates and other indicators.

The margin is calculated on the basis of the leverage and represents in itself the amount of capital required to open and maintain a position.

Formula: Margin = (contract Size*lot Value) / Leverage.

Ley us suppose, that your trading account has a leverage of 1: 100 and you want to buy 1 lot (fixed at 100 000) EUR / USD, the leverage gives you the opportunity to pay 1/100 of the invested amount (this will be the margin used for this single position).

1 lot EUR / USD = 100,000 EUR vs USD

If the opening price of EUR / USD was 1.12, then the deal amount will be (100,000 * 1.12) or 112,000 USD.

The margin for the above-mentioned position is (112,000/100) 1,200 USD.

**Free margin**

The free margin appears at the bottom of the platform and represents the difference between the current account balance and the margin of opened positions.

Free margin = current account balance – margin.

**The level of margin**

Percentage based on the amount of margin used and the account balance. If the margin level is less than 100%, GBL investing may freeze the opening of new positions. If the margin level is below the margin requirement level (at 100% of the margin level), the trader is advised to invest more. GBL investing can automatically close opened positions and prevent further trading when the margin level falls below the stop-out level.

Formula: margin level = (Balance / Margin) * 100

A margin requirement occurs when the trader's capital in percentage falls below the margin requirement.

It should be noted that GBL investing has no obligation to provide margin requirements to traders. However, it is recommended to maintain a margin level above 100%.

Stop-out level - from 20% to 100% of margin. When reaching the stop-out level, the system will start closing your opened positions automatically, without any additional notification.

**Example 1:**

The client invested 10,000 USD, set a maximum leverage of 1: 100. A trader can open positions up to (10,000 * 100) 1,000,000 USD which is equal to 10 lots.

Let's say the stop-out is 10%.

The client opens a position TO BUY 5 LOTS of EUR/USD at 1.12.

The amount of a separate position will amount to (500,000 EUR * 1.12) = 560,000 USD.

Margin will be (560,000/100) 5600 USD.

The free margin will be (10 000/5 600) 4 400 USD.

The margin level will be [(10,000/5600) *100] =178.57%.

**A profitable script:**

If the EUR / USD level rises up to 1.135, the trader will make a profit [(500,000 EUR * 1.135) -560,000 USD] = 7,500 USD.

The free margin will rise up to (17,500 – 5,600) = 11,900 if we assume that the position is not closed yet.

The margin level will be [(17 500/5600) *100] =312.5%.

**Unprofitable script:**

If the EUR / USD level falls to 1.105, the trader will suffer a loss [560,000 USD - (500,000 EUR * 1.105)] =-7,500 USD.

The free margin will drop to (2,500 – 5,600) = -3100, assuming the position is not closed yet.

The margin level will drop to [(2500/5600)*100] = 44.6%.

Since the margin level is below 100%, the trader cannot open new positions.

If EUR / USD continues to fall and reaches the level of 1.101, the trader will lose [560,000 USD – (500,000 EUR * 1.101)] =- 9500 USD.

The margin level will drop to [500/5600 * 100] = 8.9%. Since the margin level is now below the stop-out level of 10%, the position will be automatically closed by the system.

**Example 2:**

The client invested 10,000 USD, set a maximum leverage of 1: 300. The trader can open positions up to (10,000 * 300) 3,000,000 USD, which is equal to 30 lots.

The client opens a position TO BUY 20 LOTS EUR/USD at 1.12.

The volume of a single position will be (2 000 000 EUR * 1.12) = 2 240 000 USD.

The margin will be (2 240 000/300) 7 467 USD.

The free margin will be (10 000/7 467) =2 533 USD.

The margin level will be [(10,000/7 467) *100] =133.92%.

**A profitable script:**

If the EUR / USD level rises up to 1.135, the trader will receive a profit [(2 000 000 EUR * 1.135) -2 240 000 USD] = 30 000 USD.

Free margin will rise up to (40 000 – 7 467) = 32 533, if we assume that the position is not closed yet.

The margin level will be [(40,000/7,467)*100] =536.69%.

**Unprofitable script:**

If the EUR/USD falls to 1.11625, trader will suffer loss [2,240,000 USD (2,000,000 EUR * 1.11625)] =- 7,500 USD.

The free margin will drop to (2,500 – 5,600) = -3100, assuming the position is not closed yet.

The margin level will drop to [(2500/7,467)*100] = 33.48%.

Since the margin level is below 100%, the trader cannot open new positions.

If the EUR/USD continues to fall and reaches the level of 1.1155, then the trader will lose [2,240,000 USD (2,000,000 EUR * 1.11525)] = 9500 USD.

The margin level will drop to [500/7,467 * 100] =6.69%. Since the margin level is now below the stop-out level of 10%, the position will be automatically closed by the system.

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