Before initiating a new trade, it is always advantageous to know
the maximum number of units that you can safely trade without
risking a margin call based upon your current account balance.
Most trading platforms provide an online utility that calculates
this information.
Enter the following data fields to calculate the maximum number of units
to buy or sell:
• Margin available. This is the amount in your margin account you
want to earmark for the current trade.
• Margin percent. This is your broker’s margin percentage for leveraging
trades.
• Currency pair. Select the corresponding currency pair. In this example,
select EUR/USD.
• Current price. Enter the current ask price in the currency pair.
• Conversion rate. If the quote currency in the selected currency pair is
USD, then enter “1.”
The formula to calculate the maximum units that can be traded is:
Units Available
=100 x Margin Available x Rate / (Current Price x Margin Percent)
If USD is the base currency, then this reduces to:
Units Available = 100 x Margin Available / Margin Percent
Cross rates can be handled in the same fashion by simply manipulating
the conversion rate.
Note: Always decrease the units available slightly to avoid a
margin call. Recommended 10 percent.
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