What is Dynamic Leverage in Forex trading? How does it work?
8 rules that you should know about Forex Dynamic Leverage.
What is Dynamic Leverage in Forex?
Some Online Forex and CFD brokers are using a dynamic way to calculate margin requirement needed to maintain a trade in MT4.
This calculation is automatically adjusting the required margin needed for each open position.
Through this way client is enjoying lower required margin on smaller volumes which is increasing dynamically as volume is built up.
As the volume per Instrument of a client increases, the maximum leverage offered decreases accordingly.
For MT4, MT5 and cTrader trading platform, FxPro has introduced “Dynamic Leverage” on Spot Indices, Spot Energies and Energy Futures since Friday, January 29th.
All the existing positions will be affected by these changes, so all traders need to prepare to have sufficient margin to cover all positions.
1. Dynamic Leverage for Forex currency pairs
See the table below for the applicable Dynamic Leverage for Forex currency pairs on FXPro’s trading platforms.
| Open Lots | Maximum Leverage |
|---|---|
| From 0 to 100 | Maximum Leverage 1:500 |
| From 100 to 200 | Maximum Leverage 1:200 |
| From 200 to 300 | Maximum Leverage 1:100 |
| From 300 to 500 | Maximum Leverage 1:50 |
| From 500 | Maximum Leverage 1:33 |
Example of FXPro’s Dynamic Leverage on Forex pairs
Let’s say the your account leverage is 1:500.
Consider a EUR account with 300 Buy (or Sell) lots EURUSD.
In this example, the account leverage is greater than symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below.
| Lots | Maximum Leverage | Applicable Leverage | Margin |
|---|---|---|---|
| From 0 to 100 | 1:500 | 1:500 | 100 (Lots) * 100,000 / 500 (leverage) = 20,000 EUR |
| From 100 to 200 | 1:200 | 1:200 | 100 (Lots) * 100,000 / 200 (leverage) = 50,000 EUR |
| From 200 to 300 | 1:100 | 1:100 | 100 (Lots) * 100,000 / 100 (leverage) = 100,000 EUR |
Total Required Margin is 170,000 EUR.
In this case, the utilized leverage is 1:176.47.
2. Dynamic Leverage for Precious Metals
See the table below for the applicable Dynamic Leverage for Precious Metals on FXPro’s trading platforms.
The below shows FXPro’s Dynamic Leverage for GOLD, GOLDEURO, SILVER and SILVEREURO.
| Lots | Margin Requirement | Maximum Leverage |
|---|---|---|
| From 0 to 50 | 0.5% | 1:200 |
| From 50.01 to 100 | 1% | 1:100 |
| From 100.01 to 150 | 2% | 1:50 |
| From 150.01 | 4% | 1:25 |
Note that the Dynamic Leverage applied for GOLDoz and GOLDgr are different from above, as the contract sizes are difference.
For PLATINUM, the Dynamic Leverage is fixed to 1:50 for any trading volume.
Example of FXPro’s Dynamic Leverage on Precious Metals
Let’s say the your account leverage is 1:500.
Consider a USD account with 150 Buy (or Sell) lot of Gold at spot price of 1,250 USD.
In this example, the account leverage is greater than symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below:
| Lots | Margin Requirement | Applicable Margin Requirement | Margin | Margin USD |
|---|---|---|---|---|
| 50 | 0.50% | 0.50% | 0.50% (margin req.) * 100 (oz) * 50 (Lots) * 1,250 (price of gold spot) | $31,250.00 |
| 50 | 1.00% | 1.00% | 1.00% (margin req.) * 100 (oz) * 100 (Lots) * 1,250 (price of gold spot) | $62,500.00 |
| 50 | 2.00% | 2.00% | 2.00% (margin req.) * 100 (oz) * 100 (Lots) * 1,250 (price of gold spot) | $125,000.00 |
Total Required Margin is $218,750.00.
In this case, the utilized leverage is 1:85.7.
3. Dynamic Leverage for Futures
See the table below for the applicable Dynamic Leverage for Futures on FXPro’s trading platforms.
| Open Lots | Margin Requirement | Maximum Leverage |
|---|---|---|
| From 0 to 50 | 2% | 1:50 |
| From 50 to 100 | 4% | 1:25 |
| From 150 to 300 | 16% | 1:6.25 |
| >From 300 | 20% | 1:5 |
Example of FXPro’s Dynamic Leverage on Futures
Let’s say the your account leverage is 1:500.
Consider a USD account with 150 Buy (or Sell) lots of Nikkei225 Future at 18,500.
In this example, the account leverage is greater than the symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below:
| Lots | Margin Requirement | Applicable Margin Requirement | Margin | Margin USD |
|---|---|---|---|---|
| 50 | 2% | 2% | 50(Lots) *5($) *18,500 (Opening Price) * 2%(margin req.) | $92,500 |
| 50 | 4% | 4% | 50(Lots) *5($) *18,500 (Opening Price) * 4%(margin req.) | $185,000 |
| 50 | 10% | 10% | 50(Lots) *5($) *18,500 (Opening Price) * 10%(margin req.) | $462,500 |
Total Required Margin is $740,000.
In this case, the utilized leverage is 1:18.75.
4. Dynamic Leverage for Energy Futures / Spot
See the table below for the applicable Dynamic Leverage for Energy Futures / Spot on FXPro’s trading platforms.
| Open Lots | Margin Requirement |
|---|---|
| From 0 to 20 | 1.00% |
| From 20 to 100 | 2.50% |
| From 100 | 5.00% |
Example of FXPro’s Dynamic Leverage on Energy Futures / Spot
Let’s say the your account leverage is 1:500.
Consider a USD account with 150 Buy (or Sell) lots of Natural Gas at 3.285.
In this example, the account leverage is greater than symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below:
| Lots | Margin Requirement | Applicable Margin Requirement | Margin | Margin USD |
|---|---|---|---|---|
| 20 | 1% | 1% | 20(Lots) *10000 (Contract Size) * 3.285 (Opening Price) * 1%(margin req.) | $6,570.00 |
| 80 | 2.5% | 2.5% | 80(Lots) *10000 (Contract Size) * 3.285 (Opening Price) * 2.5%(margin req.) | $65,700.00 |
| 50 | 5% | 5% | 50(Lots) *10000 (Contract Size) * 3.285 (Opening Price) * 5%(margin req.) | $82,125.00 |
Total Required Margin is $154,395.00.
In this case, the utilized leverage is 1:31.91.
5. Dynamic Leverage for Stock Indices
See the table below for the applicable Dynamic Leverage for Stock Indices on FXPro’s trading platforms.
| Margin Requirement | AUS200, Euro50, France40, Germany30, Japan225, UK100, US30, USNDAQ100, USSPX500 | ChinaA50, ChinaHShar, France120, Germany50, Swiss20, Spain35, US2000, GerTech30, Holland25, HongKong50, UKmid250 |
|---|---|---|
| 0.20% | 25 | – |
| 0.50% | 25 | – |
| 1.00% | 50 | 100 |
| 1.50% | 100 | 100 |
| 2% | 300 | 300 |
| 4% | 750 | 750 |
| 10% | 1,000 | 1,000 |
| 16% | 1,250 | 1,250 |
| 20% (for greater than) | 3,500 | 3,500 |
Example of FXPro’s Dynamic Leverage on Stock Indices
Let’s say the your account leverage is 1:500.
Consider a GBP account with 550 Lots of #UK100 at 7,300.
In this example, the account leverage is greater than symbols’ relevant values in the Leverage Monitor table, so the margin required would be as below:
| Units | Size Range | Margin Requirement | Applicable Margin Req. | Margin (Units*Margin Required*Opening Price) | Margin | Margin CCY |
|---|---|---|---|---|---|---|
| 25 | From 0 to 25 | 0.2% | 0.2% | 25*0.2%*7,300 | 365.00 | GBP |
| 25 | From 26 to 50 | 0.5% | 0.5% | 25*0.5%*7,300 | 912.50 | GBP |
| 50 | From 51 to 100 | 1% | 1% | 50*1%*7,300 | 3,650.00 | GBP |
| 100 | From 101 to 200 | 1.5% | 1.5% | 100*1.5%*7,300 | 10,950.00 | GBP |
| 300 | From 201 to 500 | 2% | 2% | 300*2%*7,300 | 43,800.00 | GBP |
| 50 | From 501 to 550 | 4% | 4% | 50*4%*7,300 | 14,600.00 | GBP |
Total Required Margin is 74,277.50 GBP.
In this case, the utilized leverage is 1:54.05.
6. Dynamic Leverage for Shares
See the table below for the applicable Dynamic Leverage for Shares on FXPro’s trading platforms.
| Margin Requirement | 4.00 % | 10.00 % | 20.00 % | 60.00 % |
|---|---|---|---|---|
| French Shares | < 25,000 | < 50,000 | < 75,000 | 75,000+ |
| German Shares | < 25,000 | < 50,000 | < 75,000 | 75,000+ |
| UK Shares | < 25,000 | < 50,000 | < 75,000 | 75,000+ |
| US Shares | < 25,000 | < 50,000 | < 75,000 | 75,000+ |
Example of FXPro’s Dynamic Leverage on Shares
Consider a EUR account with 700 Buy (or Sell) JPMorgan Shares (US Shares) @ USD103.25 with EURUSD @ 1.1550.
| Volume in USD | Indicative No. of Shares | Margin Requirement | Opening Price | Margin |
|---|---|---|---|---|
| $25000 | 242 | 4.0% | 103.25 | $25,000 (Value USD) * 4.0% (margin req.) / 1.1550 = 865.80 EUR |
| $25000 | 242 | 10.0% | 103.25 | $25,000 (Value USD) * 10.0% (margin req.) / 1.1550 = 2,164.5 EUR |
| $22275 | 216 | 20.0% | 103.25 | $22,275 (Value USD) * 20.0% (margin req.) /1.1550 = 3,857.14 EUR |
| $72275 | 700 | – | – | Total Margin Required: = 6,887.45 EUR |
Note that some trading conditions are depending on the account type you choose.
For the list and comparison of FXPro’s all trading platforms, visit the page here.
Rules of Dynamic Leverage
Unlike the normal leverage condition, ‘Dynamic Leverage’ has several rules that you must know.
- Preset account leverage will be considered for Forex. The account leverage won’t affect FUTURES and METALS margin requirement and it is relevant only for FOREX margin calculation.
- If account leverage is less than leverage level mentioned in dynamic leverage table for FOREX, then account leverage will be considered instead.
- As volume is increasing, if the account leverage is greater than the appropriate leverage level, then value from dynamic leverage table will be taken into consideration.
- Dynamic leverage calculation is based per symbol separately. If an account is trading multiple instruments at the same time then the one instrument won’t affect margin required of another instrument.
- In case of hedged positions the direction with larger volumes will be considered for margin requirement.
- Required margin is always calculated on base currency for FOREX.
- For METALS and FUTURES, calculation is based on currency denominator of the each instrument.
- If account currency is not the same, then appropriate current rate is being used in order for required margin to be shown in account currency.
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