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Margin and leverage without the jargon

Margin is the amount of your own money that the platform sets aside while a position is open. It is not a fee. When the position closes, the margin is released back to your free margin.

Leverage is the ratio between the size of a position and the margin it needs. At 1:100, a position worth $10,000 needs $100 of margin. At 1:500 it needs $20. Higher leverage lowers the margin, but it does not change how much you gain or lose for each point the price moves. That depends only on the position size.

A worked example

One lot of XAUUSD is 100 ounces. With gold at $2,380 the position is worth $238,000. At a 1% margin rate, it needs $2,380 of margin. A $10 move in the gold price changes the value of that position by $1,000. On a $5,000 account that is a fifth of your balance from one move, which is why most traders start with 0.01 or 0.1 lots.

The number to watch

Free margin is your equity minus the margin in use. If losses shrink your equity until the margin level falls to the stop-out level, the platform starts closing positions to protect the account. Keeping plenty of free margin is the simplest risk control there is.

How to read a contract specification

Every symbol in the terminal has a specification. These are the lines worth understanding before your first trade.

• Contract size is what one lot represents: 100,000 units of the base currency for most forex pairs, 100 ounces for gold, one index unit for a cash index.
• Digits and points. EURUSD is quoted to five decimal places, so one point is 0.00001 and one pip is ten points. Our spec tables show the price step of each symbol.
• Spread is the difference between the buy and sell price. It is a cost on every trade, and it changes with the market.
• Swap is the overnight financing charged or credited when you hold a position past the daily rollover.
• Sessions tell you when the symbol can be traded. Outside them, orders cannot be placed or modified.

Some account types also charge a commission per lot. Add the spread and any commission to see the full cost of a trade. The order ticket shows the current spread before you confirm.

See real tables on the forex and metals pages.

Planning a trade before you place it

A plan written before you trade protects you from decisions made in the heat of a moving market. Work through it in this order.

1. Why. One sentence on why you expect the price to move.
2. Where you are wrong. The price at which that reason no longer holds. That is your stop loss.
3. Where you take profit. A realistic target, ideally further from your entry than the stop.
4. How much you risk. A fixed share of your account, such as 1%. Only now do you work out the size.

The terminal can do the last step for you: enter the risk amount and the stop, and the risk calculator works out the volume. Practise the routine on a demo account until it feels automatic.