Margin is the amount of funds required to open and maintain a leveraged position. When trading TradFi products (e.g., XAUUSD, indices, FX pairs), margin allows you to control a larger position size with a smaller amount of funds. This article explains how margin is calculated for TradFi products and how it affects your Account Equity, Free Margin, Account Balance, and Margin Level (Risk Level).
Basic Margin Calculation Formula
TradFi uses a tiered margin system. As position exposure increases, the applicable margin requirement percentage increases progressively, based on exposure tiers.
The general formula for required margin is:
Required Margin = Position Exposure × Margin Requirement (%)
Position Exposure = Entry Price × Lot Size × Contract Size
Where:
— The Contract Size is the standard value per lot
— The Lot Size is the number of lots traded
— The Margin Requirement (%) is the percentage of the position exposure required as margin.
Note: A different contract size, lot size and margin requirement will be applied for each symbol. Please refer to this guide to check each symbol’s applicable details.
Basic Margin Calculation Examples
Example 1 – Single Position
You open a position with the following characteristics:
- 1 lot XAUUSD
- Contract Size: 100
- Entry Price: 5,000
- Margin Requirement for XAUUSD: Up to 10M: 0.2%
The required margin calculation will be as follows:
Position Exposure = Entry Price × Lot Size × Contract Size
= 5,000 × 1 × 100 = 500,000
Required margin = Position Exposure × Margin Requirement
= 500,000 × 0.2% = 1,000
You must have at least 1,000 USDx as margin to open this position.
Example 2 – Multiple Positions (Same Direction)
You open positions with the following characteristics:
- Position 1: 20 lots XAUUSD with an Entry Price of 5,100
- Position 2: 30 lots XAUUSD with an Entry Price of 5,200
- Total Lot Size: 50
- Contract Size: 100
- Margin Requirement for XAUUSD:
- Up to 10M: 0.2%
- Up to 20M: 1%
- Up to 40M: 10%
The required margin calculation will be as follows:
Average Entry Price = Total Position value / Total Position lot / Contract Size
= (5,100 × 20 × 100 + 5,200 × 30 × 100) / (20 + 30) / 100 = 5,160
Position Exposure = Entry Price × Lot Size × Contract Size
= 5,160 × 50 × 100 = 25,800,000
Or = 5,100 × 20 × 100 + 5,200 × 30 × 100 = 25,800,000
Required margin = Position Exposure × Margin Requirement
= 10M × 0.2% + 10M × 1% + 5.8M × 10% = 700,000
You must have at least 700,000 USDx as margin to open these positions.
Hedged Positions Margin Calculation
TradFi accounts support Hedge Mode by default, meaning that traders can hold both Buy and Sell positions for the same symbol simultaneously.
1. Fully Hedged: Holding both Buy and Sell positions for the same symbol with the same lot size.
Position Margin = Hedged Position Exposure × Margin Requirement (%)
2. Partially Hedged: Holding both Buy and Sell positions for the same symbol with different lot sizes.
Position Margin = Hedged Position Exposure × Margin Requirement (%) + Unhedged Position Exposure × Margin Requirement (%)
Please note that:
- Hedging does not eliminate margin requirements.
- The margin is calculated based on the average entry price for both fully hedged and partially hedged positions.
- For fully hedged positions, the Account Equity may still fluctuate due to:
- Different swap fee rates applied to Buy and Sell positions, and
- The net unrealized P&L impact caused by floating spreads (the difference between bid and ask prices).
Therefore, even when both sides hold the same lot size, the account equity is not fixed and may vary over time.
Hedged Positions Margin Calculation Examples
Example 1 – Fully Hedged Positions
You open positions with the following characteristics:
- Position 1 - Buy : 1 lot XAUUSD with an Entry Price of 5,000
- Position 2 - Sell : 1 lot XAUUSD with an Entry Price of 5,100
- Total Lot Size: 2
- Contract Size: 100
- Margin Requirement for XAUUSD: Up to 10M: 0.2%
The required margin calculation will be as follows:
Average Entry Price = Total Position value / Total Position lot / Contract Size
= (5,000 × 1 x 100 + 5,100 × 1 x 100) / (1 + 1) / 100 = 5,050
Position Exposure = Entry Price × Lot Size × Contract Size
= 5, 050 × 1 × 100 = 505,000
Required margin = Hedged Exposure × Margin Requirement (%)
= 505,000 × 0.2% = 1,010
You must have at least 1,010 USDx as margin to open these positions.
Example 2 – Partially Hedged Positions
You open positions with the following characteristics:
- Position 1 - Buy : 5 lot XAUUSD with an Entry Price of 5,000
- Position 2 - Sell : 3 lot XAUUSD with an Entry Price of 5,100
- Total Lot Size: 8
- Contract Size: 100
- Margin Requirement for XAUUSD: Up to 10M: 0.2%
The required margin calculation will be as follows:
Position Average Entry Price = Total Position value / Total Position lot / Contract Size
=(5,000 × 5 x 100 + 5,100 × 3 x 100) / (5 + 3) / 100 = 5,037.5
Buy Position Average Entry Price = 5,000
Hedged Position Exposure = Entry Price × Lot Size × Contract Size
= 5037.5 × 3 × 100 = 1,511,250
Unhedged Position Exposure = 5,000 × 2 × 100 = 1,000,000
Exposure for 5 Lot Buy = 5,000 × 5 × 100 = 2,500,000
Position Margin for XAUUSD = Hedged Position Exposure × Margin Requirement (%) + Unhedged Position Exposure × Margin Requirement (%)
=1,511,250 × 0.2% + 1,000,000 × 0.2% = 5,022.5
You must have at least 5,022.5 USDx as margin to hold these positions.
Example 3 – Partially Hedged with Multiple Positions
You open positions with the following characteristics:
- Position 1 -Buy: 30 lots XAUUSD with an Entry Price of 5,000
- Position 2 - Sell : 30 lots XAUUSD with an Entry Price of 5,100
- Position 3 -Buy: 20 lots XAUUSD with an Entry Price of 5,200
- Contract Size: 100
- Margin Requirement for XAUUSD:
- Up to 10M: 0.2%
- Up to 20M: 1%
- Up to 40M: 10%
The position margin calculation will be as follows:
After opening Position 1:
Position Average Entry Price = 5,000
Position Exposure = Entry Price × Lot Size × Contract Size
= 5,000 × 30 × 100 = 15,000,000
Considering the following margin requirements (%)below:
Using 0.2% : 10,000,000 / 15,000,000 =0.66666666
Using 1%: 5,000,000 / 15,000,000 = 0.33333333
Position Margin for XAUUSD = Position Exposure × Margin Requirement
=15,000,000 × 0.66666666 × 0.2% + 15,000,000 × 0.33333333 × 1% = 70,000
You must have at least 70,000 USDx as margin to hold this position.
After opening Position 2:
Position Average Entry Price = Total Position value / Total Position lot / Contract Size
= (5,000 × 30 x 100 + 5,100 × 30 x 100) / (30 + 30) / 100 = 5,050
Hedged Position Exposure = Entry Price × Lot Size × Contract Size
= 5,050 × 30 × 100 = 15,150,000
Considering the following margin requirements (%)below:
Using 0.2% : 10,000,000 / 15,150,000 = 0.660066
Using 1%: 5,150,000 / 15,150,000 = 0.33993399
Position Margin for XAUUSD = Position Exposure × Margin Requirement
= 15,150,000 × 0.660066 × 0.2% + 15,150,000 × 0.33993399 × 1% = 71,500
You must have at least 71,500 USDx as margin to continue holding this position.
After opening Position 3:
Position Average Entry Price = Total Position value / Total Position lot / Contract Size
= (5,000 × 30 x 100 + 5,100 × 30 x 100 + 5,200 × 20 x 100) / (30 + 30 + 20) / 100 = 5,087.50
Buy Position's Average Entry Price = (5,000 × 30 x 100 + 5,200 × 20 x 100) / (30 + 20) / 100 =5,080
Hedged Position Exposure = Entry Price × Lot Size × Contract Size
= 5,087.50 × 30 × 100 =15,262,500
Unhedged Position Exposure = 5,080 × 20 × 100 = 10,160,000
Total Buy Position Exposure = 5,080 × 50 × 100 = 25,400,000
Considering the following margin requirements (%)below:
Using 0.2% : 10,000,000 / 25,400,000 = 0.39370078
Using 1%: 10,000,000 / 25,400,000 = 0.39370078
Using 10%: 5,400,000 / 25,400,000 = 0.21259842
Hedged Position Margin = Hedged Position Exposure × Margin Requirement (%)
= 15,262,500 × 0.39370078 × 0.2% + 15,262,500 × 0.39370078 × 1% + 15,262,500 × 0.21259842 × 10% = 396,584.64
Unhedged Position Margin = Unhedged Position Exposure × Margin Requirement (%)
= 10,160,000 × 0.39370078 × 0.2% + 10,160,000 × 0.39370078 × 1% + 10,160,000 × 0.21259842 × 10% = 264,000
Position Margin for XAUUSD = Hedged Position Margin + Unhedged Position Margin
= 396,584.64 + 264,000 = 660,584.64
You must have at least 660,584.64 USDx as margin to continue holding this position.
Key Account Metrics
Understanding the following metrics is essential for risk management. Please find below the different formulas for each indicator.
Notes:
— Realized amounts, such as closed P&L and commissions, will directly impact your Account Balance.
— Swap fees accumulate while a position remains open. Once charged, they will be reflected in your Account Equity, and will be fully realized in your Account Balance after the position is closed.
— Unrealized P&L from open positions will affect your Account Equity, but will not impact your Account Balance until the position is closed.
Full Example – Margin & Risk Calculation
You make an initial deposit of 10,000 USDx to your account and open a buy position with the following characteristics:
- 1 lot XAUUSD
- Contract Size: 100
- Entry Price: 5,000
- Margin Requirement for XAUUSD: Up to 10M: 0.2%
After opening the position, a commission of 6 USDx is paid. Your Account Balance is now 9,994 USDx.
The required margin to maintain your position will be as follows:
Position Exposure = 5,000 × 1 × 100 = 500,000
Required margin = 500,000 × 0.2% = 1,000
After holding the position for a certain period, your position incurs an Accumulated Swap Fee of 50 USDx and the Market Bid Price reaches 5,020. The margin and risk calculations will be as follows:
Unrealized P&L = (Bid Price - Entry Price) x Lot size x Contract Size
= (5,020 − 5,000) × 1 × 100 = 2,000
Account Equity = Account Balance + Unrealized P&L − Accumulated Swap Fees
= 9,994 + 2,000 - 50 = 11,944
Margin Level (%) = (Account Equity / Used Margin) × 100%
= (11,944 / 1,000) × 100% = 1,194.4%
Stop-Out & Risk Reminder
Please note that TradFi will trigger a Stop-Out when your Margin Level falls below 50%. When this occurs, the system will begin closing positions automatically, starting with the position incurring the largest loss.
To help manage trading risks effectively, please take note of the following:
- Higher position exposure results in higher tiered margin requirements.
- Hedging does not eliminate margin requirements.
- Unrealized profits increase Account Equity but do not increase your withdrawable balance.
- Maintaining sufficient Free Margin is especially important during periods of high market volatility.
We strongly recommend monitoring your Margin Level regularly and ensuring adequate margin is maintained at all times to reduce liquidation risk.