Margin on USD/JPY Where the Dollar Is the Base

[Fairman]

Margin on USD/JPY Where the Dollar Is the Base

Scenario: you want to buy one standard lot of USD/JPY at 150.00. Your account is in dollars, and leverage is 1 to 30. What margin is required?

Work it out. One standard lot is 100,000 units of the base currency, which here is the dollar. The notional value is therefore 100,000 dollars, regardless of the exchange rate. Required margin at 1 to 30: 100,000 divided by 30, which is 3,333 dollars.

Compare with EUR/USD. There, the base is the euro, so the notional in dollars depends on the exchange rate, and one lot at 1.10 was worth 110,000 dollars. For pairs with the dollar as the base, the notional is simply 100,000 dollars per lot.

For a cross like EUR/JPY, the margin is based on the euro value of the lot, converted into your account currency. One lot is 100,000 euros, or 110,000 dollars at EUR/USD 1.10, so the margin is the same 3,667 dollars as EUR/USD, at 1 to 30.

So the margin depends on the base currency's value in your account currency. A trader who forgets this might think a yen pair needs less or more margin than it does.

Most platforms calculate margin automatically, but knowing the logic lets you check it, and spot errors in a calculator.

Takeaway: margin follows the base currency, and pip value follows the quote currency.

Practical step: compute the margin for one lot of USD/CAD, EUR/JPY, and GBP/USD at your leverage.