The margin level is a risk management indicator that helps you understand the influence of the currently opened positions on your account.
Margin level is a mathematical equation that effectively tells the trader how much of their funds are available for new trades.
The higher the margin level, the higher the amount of cash available to trade.
The lower the margin level, the lower the amount of cash available to trade, and this is where an account could be subject to a margin call.
How is margin level calculated?
It is calculated with the following formula:
Margin level = equity/margin x 100%
If you don't have any trades open, your margin level will be zero. Once a position is opened, the margin level will depend on several factors such as:
Volume
Type of market
Leverage
Margin level example
The xStation platform automatically calculates your margin level and you can view it at the bottom of your screen.
In the example above, the margin level is calculated in the following way:
Margin level = 99.81/33.30 x 100% = 299.73%
What is a Margin Call?
A Margin Call is a notification from the trading platform to a client when their account value falls below the required margin ratio to maintain open positions.
In other words, this is when the trading platform "calls" the client to provide additional capital (by depositing more money or closing a portion of existing open positions). This margin call aims to minimize the risk of losses exceeding the client's available capital. However, XTB will not be responsible in any case where the client does not receive a margin call; the responsibility for monitoring and managing the portfolio rests entirely with the investor.
At XTB, a margin call will be executed when the Margin Ratio falls below 80%. If you let the Margin Ratio fall below 30%, the system will begin closing open positions, starting with the positions experiencing the most losses, until the Margin Ratio returns to above 30%.
Margin requirements and margin calls only apply to CFD trading.