Please Note:
In these examples margin is displayed in your account currency. If the instrument you are trading has a different base currency to your account currency, then margin will be calculated in the base currency and then converted to your account currency at the prevailing exchange rate.
There are numerous factors that can affect the rate at which your closeout is executed, including spread, price volatility and market liquidity. While a margin closeout is a final measure to help preserve your remaining capital, it is not a substitution for using stop losses on trades. OANDA encourages the use of stop losses as part of a risk management strategy.
If you leave positions open over the weekend or when markets are ‘halted’, you cannot close them until the markets reopen. Prices may change significantly or ‘gap’ when trading resumes. If prices move against you, a margin closeout may be triggered when trading resumes.
The margin needed to open each trade is derived from the leverage limit associated with the asset class that you wish to trade. For example, if you were trading with a particular instrument that had a maximum leverage of 30:1, you would need margin of 3.3 percent calculated from 1/30 x 100 = 3.3 percent. In other words, when trading with leverage of 30:1 you can open a £30 trade for each pound available in your account.
EXAMPLE:
Account currency: GBP
Leverage 30:1
In this scenario, you wish to open a long position of 5,000 units of GBP/USD. As leverage is 30:1, the margin needed to open this position is 3.3 percent of 5,000 = 166.67 GBP.
Calculating the Net Asset Value (NAV)
The NAV represents the current value of your account. It is the total of your account balance and all unrealised profits or losses (P/L) associated with your open positions.
Unrealised P/L refers to the profit or loss held on your open positions. This is equal to the profit or loss that would be realised if all of your open positions were immediately closed at prevailing market prices. As a result, this figure continuously fluctuates with price changes. Unrealised P/L is displayed in the ‘Account Summary’ section of the fxTrade user interface.
If you have open positions, then NAV is the sum of your account balance and your account’s unrealised P/L. Open positions will also mean that your account’s NAV will fluctuate with market movement. The NAV is displayed in the ‘Account Summary’ section of the fxTrade user interface.
EXAMPLE:
Account currency: USD
Account balance: 50 USD
In this scenario, you have one open long position of 10,000 units of EUR/USD
The opening price of your position was 1.2581 and the current price for EUR/USD is 1.2570/72.
Accordingly, unrealised P/L = 10,000 x (1.2570 - 1.2581) = 10,000 x (- 0.0011) = -11 USD
NAV = 50 USD (Account Balance) - 11 USD (Unrealised P/L) = 39 USD
Calculating Available Funds
Your available funds are the sum of your account’s NAV that is not being used as margin requirement to maintain open positions. These funds are free to be used to open another position, transfer to another sub-account or withdraw. This figure is detailed in the ‘Margin Available’ field on the Account Summary section of the fxTrade user interface.
EXAMPLE:
Account balance: 550 GBP
Unrealised P/L: -45 GBP
With the above in mind, your account’s NAV is 550 GBP – 45 GBP = 505 GBP.
In this example, you have two open positions with a cumulative margin requirement of 300 GBP.
Therefore, your margin available = 505 GBP (NAV) – 300 GBP (margin requirement) = 205 GBP.
In this scenario, you would be able to open a new position if the margin needed to open that position was less than 205 GBP.
Calculating When a Margin Closeout Will Occur
If your Margin Closeout Value* falls to less than half of your margin required, all open positions will be automatically closed using the current fxTrade rates at the time of closing. If trading is unavailable for certain open positions at the time of the margin closeout, those positions will remain open and the fxTrade platform will continue to monitor your margin requirements. When the markets reopen for the remaining open positions, another margin closeout may occur if your account remains under-margined.
*The Margin Closeout Value is equal to your balance plus your unrealized P/L from all open positions, converted into the currency of the account, all calculated using the current midpoint rates. This value is approximately equal to your NAV, but with slight deviations due to being calculated based on midpoint rates rather than bid/ask rates.
EXAMPLE:
Account currency: GBP
In this example, you have one open long position in 10,000 units of GBP/ZAR. You are trading this instrument with leverage of 20:1.
With the above in mind, the margin needed to open your position was five percent of 10,000 GBP = 500 GBP. Therefore, the margin required to maintain your open position is 0.5(500 GBP) = 250 GBP.
This position will close therefore when your account’s NAV falls to 250 GBP or below.
