Leverage and Margin

  • Q1) What is leverage?

    Leverage is expressed as the ratio of a traded contract versus the margin/deposit required to hold that contract. For example, a trade with leverage of 50:1 would require 2 units of margin for every 100 units of the traded consideration (equal to 2% margin). Likewise leverage of 25:1 is equivalent to 4% margin factor, and leverage of 20:1 is equal to 5% margin factor. Leverage to Suit is a City Index FX feature that allows you to adjust your leverage ratio either up or down for each available instrument.

    Trading Leverage

    Equivalent Margin Required

    20:1

    5%

    25:1

    4%

    50:1

    2%

    100:1

    1%

    200:1

    0.5%

    250:1

    0.4%

    300:1

    0.33%



    Please note: increasing leverage can significantly impact the rate at which losses and profits are incurred on open positions. Please make sure you understand the implications before making any changes to leverage on your account.

    Q2) How does my market exposure change with leverage?

    When the leverage ratio on a forex trade is increased (for example, 25:1 to 50:1) this results in a decrease in the margin required to hold a position. With this higher leverage ratio comes greater market exposure. Our Advantage Web trading platform allows you to customise your leverage ratio using our Leverage to Suit feature, enabling greater control over your level of market exposure.

    Q3) How is forex margin calculated at City Index?

    Margin is calculated at the instrument level and is the sum of margin on all open long and short positions per instrument. Whichever is greatest (either the sum of margin for your long positions or your short positions) will be the total margin assigned to all positions in that instrument. Where the sum of margin for both long and short positions is equal, the long position will be treated as the greatest.

    Q4) What is a margin requirement?

    Margin requirement is the deposit required to maintain each open trade on your account. To open a trade you must have sufficient trading resources on your account to cover the margin requirement for that trade (cash balance + profit/loss from open trades). Sufficient trading resource (e.g. cash) must then be maintained in order to keep that (and any other) trade open. You can monitor the level of cover you have for your open positions using the Margin Level Indicator on each trading platform. Your open positions may be subject to closure under our Margin Close Out policy if your net equity falls below your Margin Requirement.

    Q5) How is basic margin calculated?

    Margin factor is the value or leverage ratio used to determine the amount of cash required to open a new position. For example, the default leverage ratio for EUR/USD is 50:1 or 2%. Therefore, to open a new position of €150,000 EUR/USD at 1.38500, the following calculation would be applied: Margin Required = Trade Size x Price / Leverage Ratio 150,000 (EUR) x 1.38500 (EUR/USD) / 50 = $4155.00 (or equivalent in the base currency of the account).

    Q6) How do I change 'leverage'?

    Leverage can easily be changed on both the web and mobile platforms from the 'Market Information' sheets within the Deal Ticket for each product. Please refer to the user guides for further detail.