Leverage and margins
Find all the necessary information about the leverage levels and required margins that DUO Markets offers for its various instruments.
Leverage
It is a very useful tool for clients to take advantage of market movements using only small amounts of capital. However, it also carries a higher risk, as losses can be increased when trading using leverage. It is recommended that clients use risk management tools (such as placing stop loss orders).
100:1
Leverage
500:1
Leverage
Notional Value
(1 lot)
$100,000
$100,000
Margin
requirement
$1,000
$200
Reference values. For more information contact our support team: [email protected]
Stops Out & Margin Call
Margin refers to the minimum capital you must have in your trading account to be able to open trades. A Margin Call will occur when your margin requirement reaches a certain level at which you will no longer be allowed to open additional trades as you have a large part of your capital committed to various trades (or you have too little capital to open a new trade).
In DUO Markets the Margin Call will be given when your Margin Level reaches 50%.
The Stop Out level is the level at which some of your trades may start to close automatically.
This happens because your current capital is below the minimum necessary to keep your trades open. The Stop Out will occur when your margin reaches 20%.
The MT4 platform automatically calculates and displays your used margin, free margin and margin level (%) so you will always know if you are close to the Margin Call or Stop Out level.
Margin Call
Margin Stop
Equity (%) of Margin Requirement
50%
20%
What is leverage?
Leverage is an operational facility that a broker provides to its clients so that they can carry out operations that require more capital than the client's available capital. In that sense, leverage has a "multiplier" effect.
Advantages and disadvantages
of leverage
Advantages
The main advantage of leverage is that it allows traders to pay only a fraction of the total position. In other words, it allows them to have more trading capital.
Disadvantages
On the other hand, the main disadvantage of leverage is that you are exposed to a greater loss than if you were to perform the same trade without leverage.
This is why leverage is considered a "double-edged sword", as it allows for higher profits, but also exposes traders to greater risks.
How does leverage affect
your trading?
Example 1
In this example we will assume that we are a trader with a capital of US$5000 and a leverage of 1:50.
Let’s imagine that we will trade the EURUSD pair and place a sell trade for 1 lot.
The exchange rate at the beginning is 1 Euro = 1.3600 USD.
Leverage
The leverage for this trade is calculated as follows
(136,000 USD / 5,000 USD = 27.2)
In other words, our leverage for this operation is 1:27.
PIP value
In the case of EUR/USD the pip is the variation in the 4th decimal place, i.e. 0.0001 or 0.01% of the amount traded in the base currency represented in the cross currency. The calculation for the PIP value will be as follows:
We are trading 100,000 units of Euro, the pip is measured to the fourth decimal place 0.0001 and the EUR/USD’s TC is 1.36.
(0.0001/1.36)*100,000 = 7.35 Euros x pip. We need to convert it into USD: 7.35*1.36 = 10 USD x pip.
Stop Loss
We will place a Stop Loss of 50 pips, which means that in case our trade turns out to be losing, we will have a maximum loss of 500 USD (50pips x 10USDxpip).
Profit or Loss:
Let’s imagine that the Euro TC falls to 1.3400 in a couple of days and we decide to close the position at that level.
The profit would be as follows:
(1.3600 – 1.3400) = 0.0200, in other words, there is a difference of 200 pips in our favor. 200 pips x 10 USD x pip = 2,000 USD
What role did
leverage play?
Without leverage, the operation would have looked like this:
With a capital of 5,000 USD we could only go short for an amount of 3,676.47 Euros (USD$5,000 / 1.3600).
At this trading volume, how much is the pip worth? Doing the calculation, in this trade the pip value would be only 0.36764 USD x pip.
With a profit of 200 pips on this trade, the unleveraged profit would have been 73.52 USD.
Example 2
In this example we will assume that we are a trader with a capital of US$7000 and a leverage of 1:50.
Let’s imagine that we will trade the EURJPY pair and place a sell trade for 2 lots.
The starting exchange rate is 85.23 (USD/JPY = 85.23).
The maximum we could trade with our 1:50 leverage is 350,000 USD (7000 USD x 50).
Leverage
The leverage in this trade is calculated as follows
(200,000 USD / 7,000 USD = 28.57)
In other words, the leverage for this operation is 1:28.57.
PIP value
In the case of USD/JPY the pip is represented by the variation in the 2nd decimal place, i.e. 0.01 or 1% of the amount traded in the base currency represented in the cross currency.
The calculation for the PIP value
will be as follows:
We are trading 200,000 dollar units, the pip is measured to the second decimal place 0.01 and the TC of the USD/JPY is 85.23. (0.01/85.23)*200,000 = 23.46 dollars x pip.
Stop Loss
We will place a stop loss of 200 pips on this trade, at the level of 87.23. If the trade goes against us we will have a maximum loss of 4692 USD (200pips x 23.46USDxpip).
Profit or Loss:
Let’s imagine that the operation turns out against us.
The loss would be as follows:
(87.23 – 85.23) = 2.00, in other words, there is a difference of 200 pips against us. 200 pips x 23.46 USD x pip = 4692 USD.
What role did
leverage play?
Without leverage, the operation would have looked like this:
If we have US$7,000 in the account and we want to go short on USD/JPY. We could only go short with US$7,000.
At this trading volume, how much is the pip worth? Doing the calculation, in this operation the pip value would be only 0.8213
A profit of 200 pips on this trade would have represented a total of 164.26 USD.
Do you have any questions?
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