Margin Calculations and Stop Losses
When placing a trade or order to open, you will be required to have funds in excess of the Margin Requirement for the trade or order. The Margin Requirement is the amount of funds in your base currency required to open a trade or order. If you attach a guaranteed or non-guaranteed stop loss to your position, you will be limiting your liability of your position from the downside risk therefore your margin requirement will change in many cases. Please view the relevant product information window for the product to see whether or not you can place a guaranteed stop onto your position and if non-guaranteed, what the margin buffer is.
When placing a trade or order to open the margin requirement can be found to the left of the trade size field.
There are three key scenarios when opening a trade or an order to open that have different margin requirement calculations:
Opening a trade with no stop
Effective Margin Rate x Trade Value
In this example, the trade value is £6,668.00 and the Effective Margin Rate is 1%. Therefore the margin requirement can be calculated as follows: 1% x 6,668.00 = £66.68
Opening a trade with a guaranteed stop
Monetary Risk of trade
The monetary risk of the trade can be calculated as follows: (Entry Price – Stop Loss level) x Trade Size
In this example, the entry price is 6,667.8 and the stop loss level is 6,640.6
(6,667.8 - 6,640.6) x 1 = £27.20
Opening a trade with a non-guaranteed stop
(Monetary Risk of Trade) + (Trade Value x Base Margin Rate x Margin Buffer)
In this example, the trade value is £6,667.30 and the Effective Margin Rate is 1%. The Margin Buffer can be found in the Product Information window; the Margin Buffer is 20%. The monetary risk of the trade can be calculated as follows: (Entry Price – Stop Loss level) x Trade Size.
Therefore the margin requirement can be calculated as follows: ((6,667.3 – 6,651.6) x 1) + (6,667.3 x 1% x 20%) = £29.03
When placing a trade or order to open with a stop there will be a ‘ceiling’ amount; the highest amount of margin you can be charged. The ceiling amount is the margin requirement in the absence of a stop: Effective Margin Rate x Trade Value
As the above meets this criterion, the margin requirement would be based on the ceiling amount.
If you place an order to open, you will be charged margin based on the above scenarios. If you place an OCO Order, you will be charged margin only for the value of the side with the highest margin requirement.
Please note that it is also not possible to benefit from margin reduction through the use of attached stop loss orders in relation to single equity bets/trades.