Margin and Leverage

The OANDA fxTrade platform supports margin trading, which means you can enter into positions larger than your actual account balance.

An advantage of margin-based trading is that you can leverage the funds in your account and potentially generate large profits relative to the amount invested. The disadvantage is that you can potentially generate significant losses and your margin capital can be reduced very quickly. You may lose more than you invest if the market moves against your position.


Consider Market Events and Weekends

Rate volatility and changes in global market liquidity can result in large spread increases following news announcements,around market openings and closings, and during times of uncertainty. At such times, OANDA widens its spreads to reflect market conditions.

If you leave trades open during the weekend or halted markets, you cannot close them until the markets reopen. Note that rates may change significantly or "gap" when trading resumes. If rates move against you, a margin closeout may be triggered when trading resumes.

To avoid margin closeouts, reduce the margin you are using by closing some trades or adding more funds.


Margin closeouts

OANDA requires adequate margin (collateral) in your account at all times to cover all unrealized losses you incur on your positions.

If market rates shift against you and there’s insufficient margin to cover the unrealized loss on your open positions, a margin closeout (also called a margin call) is triggered—and all tradable open positions in your account are closed automatically. Margin closeouts reduce the possibility you will lose more than the amount of margin left in your account. To avoid margin closeouts, reduce the margin you are using by closing some trades or adding more funds.

For more info on margin closeouts and how to prevent them, read our Margin Rules.


Margin and Leverage Examples

The following examples show how much you could trade with $2,000 at 20:1 or 50:1 leverage — and the consequences to your net asset value (NAV) when the market price moves.

Example 1:

$2000
x 20:1 leverage
= $40,000 trade

If trade moves up 100 pips
Unrealized profit is $400
Your NAV = $2400

If trade moves down 100 pips
Unrealized loss is $400
Your NAV = $1600

Example 2:

$2000
x 50:1 leverage
= $100,000 trade

If trade moves up 100 pips
Unrealized profit is $1000
Your NAV = $3000

If trade moves down 100 pips
Unrealized loss is $1000
Your NAV = $1000

The last scenario in Example 2 could be a Margin Closeout!

To avoid margin closeouts, use lower leverage and never leverage your entire account balance. If your available margin is low, close or partially reduce some trades.


DISCLAIMER: 

The Commodity Futures Trading Commission (CFTC) limits leverage available to retail forex traders in the United States to 50:1 on major currency pairs and 20:1 for all others. OANDA Asia Pacific offers maximum leverage of 50:1 to on FX products and limits to leverage offered on CFDs apply Leverage for OANDA Canada clients is determined by IIROC and is subject to change. Refer to our legal section for more information.

This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA. It is not investment advice or an inducement to trade. Past history is not an indication of future performance.

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