Margin and Leverage
Unique Leverage Offering up to 888:1
• Flexible leverage between 1:1 – 888:1
• Negative balance protection
• Real-time risk exposure monitoring
• No changes in margin overnight or at weekends
At XM you can feel the difference. Regardless of your country of origin, you can trade using the same margin requirements and leverage from 1:1 to 888:1.
About Margin
Margin is the amount of collateral to cover any credit risks arising during your trading operations. Forex margin can be rather high, and the bigger it is, the more risk it imposes, but it also allows a bigger profit.
Margin is expressed as the percentage of position size (e.g. 5% or 1%), and the only real reason for having funds in your trading account is to ensure sufficient margin. On a 1% margin, for instance, a position of $1,000,000 will require a deposit of $10,000.
About Leverage
In the forex market, leverage is used by investors to profit from the exchange rate fluctuations between two different countries. A great advantage is that it is exactly the forex market where investors can obtain the highest leverage.
Using leverage means that you can trade positions larger than the amount of money in your trading account. Leverage amount is expressed as a ratio, for instance 50:1, 100:1, or 500:1. Assuming that you have $1,000 in your trading account and you trade ticket sizes of 500,000 USD/JPY, your leverage will equate 500:1.
How would it be possible to trade 500 times the amount you have at your disposal? At XM you have a free short-term credit allowance whenever you trade on margin: this enables you to purchase an amount that exceeds your account value. Without this allowance, you would only be able to buy or sell tickets of $1,000 at a time.
XM Leverage
For any of the XM trading accounts, you can select your leverage on a scale from 1:1 to 888:1. Margin requirements do not change during the week, nor do they widen overnight or at weekends. What is more, at XM you have the option to request either the increase or decrease of your chosen leverage.
Leverage Risk
On the one hand, by using leverage, even from a relatively small initial investment you can make considerable profit. On the other hand, your losses can also become drastic if you fail to apply proper risk management.
This is why XM provides a leverage range that helps you choose your preferred risk level. At the same time, we do not recommend trading close to a leverage of 888:1 due to the high risk it involves.
High leverage may multiply both big profits and big losses – this is why we suggest our clients to make transactions that are in accordance with their risk tolerance. The maximum risk of loss depends on the amount deposited in your trading account, which means that you cannot lose more money than you deposited.
Margin Monitoring
At XM you can control your real-time risk exposure by monitoring your used and free margin.
Used and free margin together make up your equity. Used margin refers to the amount of money you need to deposit to hold the trade (e.g. if you set your account at a leverage of 100:1, the margin that you will need to set aside is 1% of your trade size). Free margin is the amount of money you left in your trading account, and it fluctuates according to your account equity; you can open additional positions with it, or absorb any losses.
Margin Call
Although each client is fully responsible for monitoring their trading account activity, XM follows a margin call policy to guarantee that your maximum possible risk does not exceed your account equity.
As soon as your account equity drops below 50% of the margin needed to maintain your open positions, we will attempt to notify you with a margin call warning you that you do not have sufficient equity to support open positions.
In case you are a client accustomed to telephone trading and we feel that you can’t maintain your open positions, you may receive a margin call from our dealers, advising you to deposit a sufficient amount in order to maintain your open positions.
Stop-out Level
The stop-out level refers to the equity level at which your open positions get automatically closed. For MICRO, STANDARD and EXECUTIVE trading accounts the stop-out level is 20%
