Margin per symbol: why gold and yen crosses tie up different amounts

[Fairman]

Margin per symbol: why gold and yen crosses tie up different amounts

People tend to think of leverage as one number for the whole account. At most brokers it isn't. Each symbol has its own margin requirement, and it can vary a lot.

Majors usually get the highest leverage. Minors and crosses can be lower. Gold, silver, indices and crypto often have much higher margin requirements per lot. Some brokers also apply different margin to exotics, and in some regions the regulator sets these limits by instrument class.

For a scalper this matters in a few ways.

First, the same lot size uses very different amounts of margin depending on the symbol. One lot of gold can tie up several times what a lot of EURUSD does. If you hold both, your free margin falls faster than you'd expect.

Second, margin can change. Brokers sometimes raise margin before weekends, elections or central bank meetings, and the change applies to positions you already hold.

Third, the margin used is not your risk. A position with tiny margin can still lose a lot if the stop is wide, and one with big margin can have small risk with a tight stop. Mixing these up leads to bad sizing.

The place to find the real numbers is the contract specification window in MT5 for each symbol, or the broker's website. It takes five minutes to check the instruments you actually trade.

[Fairman]

Hedged positions add a twist. Some brokers charge margin on both sides of a hedge, some charge only on the larger side, and some use a reduced hedged margin setting. In MT5 you can see this in the symbol specification as the hedged margin value. If you hedge often, this can change how much free margin you really have. Assuming the hedge frees up margin when your broker charges both legs is how people end up close to a margin call while thinking they're flat. Check it once per symbol and note it in your trading plan.

[Fairman]

Margin requirements also depend on your account currency and the quote currency of the pair. Margin is calculated in the base currency and converted to your account currency, so a moving exchange rate changes the margin used even if you do nothing. For most scalpers holding positions for minutes this is too small to notice. For anyone holding through a big move in, say, the yen, it can shift the margin on yen crosses enough to matter when the account is already near its limits. It's rarely the deciding factor, but it's one more reason to keep a margin cushion.

[Fairman]

Brokers usually send emails about margin changes before big events, and those emails tend to get ignored. Read them, or at least filter them into a folder you check before the weekly prep. A higher margin requirement on Friday afternoon is a common reason for unexpected stop outs on accounts that were fine on Thursday. Knowing about it a day ahead gives you time to reduce size or close positions instead of finding out from a margin call. A filter rule in your mail client takes two minutes to set up.

[Fairman]

A simple calculation helps before adding a position. Look at your free margin, the margin per lot for the symbol, and how much of your equity would remain if every open position hit its stop. If that last number gets close to the stop out level, the account is too heavily loaded even if each trade individually looks fine. MT5 shows free margin and margin level in the trade tab, but the stop out scenario is something you have to work out yourself with a quick sum. Doing it once before a session is enough for most scalpers.

[FXS HongKong Scalper]

Filtering the broker emails into a folder is a good tip. On the yen crosses and gold, margin changes often show up before events in Asia too, such as Bank of Japan meetings or Japanese elections, not only before US releases. Leverage on JPY pairs can be cut at short notice when the yen moves fast. A simple pre trade check is to open the symbol specification and read the current margin requirement before sizing, since the number from last month may no longer be correct.