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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 incur significant losses and your margin capital can be reduced quickly.


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.

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

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.

If you trade around market events or leave trades open over the weekend, you may need to adjust your trading strategy.  To prevent unwanted order execution, widen you take-profits / stop-losses or trailing stops.  To avoid margin closeouts, reduce the margin you are using by closing some trades or adding more funds.

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.

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