Margin Information

Please review our margin rates and gather information related to margin trading. Familiarize yourself with the requirements for maintaining the specified margin levels.

What is the Initial and Maintenance Margin?

Initial margin and maintenance margin are designed to protect you against adverse market conditions, by creating a buffer between your trading capacity and margin close-out level.

Read more about Initial and Maintenance margin

Initial Margin

A pre-trade margin check on order placement, i.e. on opening a new position there must be sufficient margin collateral available on account to meet the initial margin requirement for the entire margin portfolio.

Maintenance Margin

A continuous margin check, i.e. the minimum amount of cash or approved margin collateral that must be maintained on account to hold an open position(s). Maintenance margin is used to calculate the margin utilisation, and a close-out will occur as soon as you do not meet the maintenance margin requirement.

Live Margin Data

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Practical Examples

How does margin work?

A margin account lets you leverage securities you already own as collateral for a loan to buy additional securities.

Example 1: Profit Scenario

Suppose you use $5,000 in cash and borrow $5,000 on margin to buy a total of $10,000 in stock.

If the stock rises in value to $11,000 and you sell it, you would pay back the $5,000 borrowed on margin and realize a profit of $1,000.

That's a 20% return on your $5,000 investment. If you didn't use a margin loan, you would have paid $10,000 in cash for the stock. Not only would you have tied up an additional $5,000, but you would have realized only a 10% return on your investment. The 10% difference in the return is the result of leveraging your assets.

Example 2: Loss Scenario

However, leverage works as dramatically when stock prices fall as when they rise.

Let's say you use $5,000 in cash and borrow $5,000 on margin to purchase a total of $10,000 in stock.

Suppose the market value of the stock you've purchased for $10,000 drops to $9,000. Your equity would fall to $4,000, which is the market value minus the loan balance of $5,000.

In this instance, you could suffer a loss of 20% due to a 10% decrease in market value.

What is a margin call?

If the margin equity in your account falls below security requirements then your account is issued a margin call. If your account is issued a margin call, you must deposit more money or marginable securities in your account or sell a position.

What are the risks associated with margin?

Margin investing carries greater risks and may not be appropriate for everyone. Before you use margin, carefully review your investment objectives, financial resources, and risk tolerance to determine whether margin borrowing is right for you. Here are some of the risks that you should think about before you get started:

  • •
    Leverage risk: Leverage works as dramatically when stock prices fall as when they rise. For example, let's say you use $5,000 in cash and borrow $5,000 on margin to purchase a total of $10,000 in stock. Suppose the market value of the stock you've purchased for $10,000 drops to $9,000. Your equity would fall to $4,000, which is the market value minus the loan balance of $5,000. In this instance, you could suffer a loss of 20% due to a 10% decrease in market value.

    This example does not account for any fees, commissions, interest, or taxes you may be required to pay.

  • •
    Margin call risk: If the securities you hold fall below the minimum maintenance requirement, your account will incur a margin call. Margin calls are due immediately. It's smart to leave a cushion in your account to help reduce the likelihood of a margin call. Sometimes you may face higher maintenance minimums, especially when the securities you're using as collateral carry additional risks, such as risks derived from concentrating your investments in one area or sector.
  • •
    Short selling is also a margin account transaction that entails the same risks as a margin call along with some added risks. When you short sell a security, you're combining several different investment strategies to potentially profit if a particular stock drops in value. However, if that shorted security rises in value, you can incur a loss that might be unlimited. In addition, you might be charged a short interest fee on the securities you borrowed to sell short; those fees can change—sometimes significantly—without warning.

What happens if I fail to meet a margin call?

If you fail to meet a margin call:

  • •Your account might have restrictions placed on it
  • •Fidelity could liquidate your positions
  • •Your account's margin and options features can be removed

What is a stopout at what level my account will be liquidated?

In forex trading, a Stop Out Level occurs when your Margin Level drops to a specific percentage (%) at which one or all of your open positions are automatically closed ("liquidated"). This liquidation occurs because your trading account can no longer support the open positions due to insufficient margin.

If your Margin Level reaches or falls below the Stop Out Level, which is set at 30% at MBFX, any or all of your open positions will be promptly closed to protect you from potential further losses.

It's important to note that a Stop Out is not a discretionary action. Once the liquidation process begins, it is typically automated and difficult to halt.

Formula:

Margin Level = (Equity / Used Margin) × 100%

Always monitor your margin level to avoid automatic position closures. We recommend maintaining a margin level above 100% for safe trading.