Monday, September 14, 2015

Used and Usable margin

When you open an account with a company which allows you  to trade on a margin you will deposit a specified amount in advance which will remain in your account till you decide to buy a car, or to decide to enter into a deal, then your account will be divided into two parts:
Used margin:
A deposit which will be deducted in advance, a refundable deposit will be returned to your account after the sale of the car, whether sold at a profit or a loss.
Usable margin:
Which is the amount remaining in your account after deducting the used margin; this amount is the maximum amount that you can lose in the deal.
We do not want to pay much attention to how the used margin is calculated by yourself often will not need to do so, always the company will tell you the amount which will be deducted from your account. In the previous example agency will tell you that it will deduce the amount of $ 1,000 from your user account for every car you purchase. If you bought two cars they will be deduced from your account $ 2,000 as a used margin and the usable margin will remain in your account is $ 1,000 available in your account. Although the company calculates the margin for you, it would be very useful to know how to do this yourself.
We can calculate the margin for any commodity with any company by the following equation:
Used margin = Price of the commodity / leverage
In the previous example: the car full value = $ 10,000 and the leverage allowed by the company is 10-fold, the company leveraged your capital 10 times, so the margin by which will be deducted by the Agency:
Used margin = Price of the commodity / leverage
                   = 10,000 / 10 = $ 1,000
And if you think to buy two cars instead of one the margin will be:
$20000 / 10 = $2000
Dealing in global markets, brokerage firms which allow trading by margin basis deal in various types of commodities- each company has a certain type of commodity, which are sold on the basis of a fixed unit called the contact size which is the least unit that can be traded from commodity.
In the previous example of the cars the size of the contract be = one car worth $ 10,000, that is, you can not trade for less than a car worth $ 10,000 and you can trade in multiples of this number as you can buy was two cars or three etc ..
Of course you are not allowed to trade a car and a half!!
And the used margin calculation method:
Used margin = number of lots * lot size / leverage
Thus you can calculate the used margin for any number of cars. If we assume that you wanted to buy 3 cars the deduction amount will be $ 3,000 as margin.
If we assume that you dealt with an agency have the same car value but it will give you a leverage equal to 20 times means that this agency will allow you to trade cars worth 20 times the amount paid as a deposit, you can calculate how much is the margin that will be deducted if you want to trade one car:
Used margin = number of lots* lot size / leverage
                   = 1 * 10.000 / 20 = $ 500
This means that this agency will deduce from your account the amount of $ 500 for every car traded by.

How to calculate the available margin?
Calculated by the following simple equation:
 Available margin= balance - Margin used
in the previous example:
You deposited $ 3,000 in your account already opened by the agency  so your balance  = $ 3,000
When you decided to buy a car the company will deduce $ 1,000 as margin, so the margin you have available now:
 Available margin = balance - Margin used
                = 3000 - 1000 = $ 2000
It is the maximum amount you can lose in the deal.

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