Calculation of Margin Trading Transaction

Calculation of Margin Trading Transaction : Although there is an opportunity for investors to invest more easily does not mean it's an easy win for investors. This means that if the investor negotiated profit system in doubt. Remember that margin trading is a way to expand their future clients of the brokerage firm.

On the other hand, if the trader or investor to take advantage of margin trading means that the trader has decided to invest. This investment has inherent risk, which should be used. Also in the investment literature margin trading is one of the investment strategies tend to approach the speculation.

Because if there is a loss of investment, margin system to create more value from the system with the physical system / from operating activities. Therefore, to take advantage of profitable trading margin, technical calculations required is quite complex.
Consider the following example:


  1. A day later, the increasing price of $ 1.8950 GBP and the investor sells (an average night / stay)
  2. The use of futures brokerage firm of USD 5 per transaction purchase just open a lot and
  3. Flowers open in GBP long positions is Rp. 5612 per day.
What will happen? U.S. assets are now 18 $ 950 (USD10, 000 x USD1.8950). However, the profit margin trading transactions and disadvantaged business transactions with cash. The commercial business net income of USD89, 44 is a trading system box = $ 100. To select the margin transaction or cash transaction?

Be careful! If the absolute value of the consideration, of course I would choose the deal in cash, because the value of the benefit is greater. But remember! To generate revenue for cash transactions $ 100 to put a lot of money $ 19,850. Instead, victory USD94, 44 at the margin trading system, simply put money 100 USD where we understand the importance of financial literacy.

This is an important indicator of the fiscal theory of the so-called rate of return on equity (ROE), how to make money on the profitability of a particular investment, which is divided as capital gains. In our example, the sales revenue earned 94.44% ROE% ROE effective trade only 0:53. Well, profit margin, ROE ROE higher number of trade and therefore very useful if you choose to deal with margin trading.

How this condition can be used? This condition can be useful if you know the currency exchange purchased should be strengthened, and that may increase costs borne by all costs, interest and costs.

And what if there is GBP strengthened against the dollar, something that is even weaker? Is it still profitable for margin trading system? For example, after many positions before USD1.18800 pounds forever put after a waiting period of one day (overnight) is activated, it turns out, GBP remains in this position. So, now the rest of USD18.800 assets. What our capital? Since the decline and assets of $ 50, then the capital of USD50 stay ($ 100 - $ 50). Taking into account all costs, expenses and interest rates, the capital of USD44.44 stay.

What happened with this situation? If you want to get (our position) of the portfolio, we need to raise funds for a business broker or futures broker, Forex broker, as the company has the equipment initial margin of 1% of the contract value. In this case, the value of 1 lot (USD10, 000), then we have a capital of $ 100 as other capital USD44.44, we have USD55, 56 (USD - USD44.444) should go.

If you need to put additional capital? According to the laws and regulations of each forex broker. Some companies send invoices additional capital (ie referred to a margin call) after initial capital below 30% margin. There is a new Forex brokerage account other capital after sending the initial capital below 25% margin.

But if we are willing to defend the position of forex brokers even liquidate long positions, ie GBP Sell us. If this happens, then you will suffer losses USD55.56 for margin trading and investing USD50 cash trade.

So you have to decide? No investment plans at a disadvantage, but it turns out that this happens ILA transactions with smaller operating cash losses, which is 0.72% of the company's profit margin as compared to 55.56% loss. So if you buy the country's currency is weak, it would be safer to do the actual trading. But it's still a loss. If you still want to use the strategy to do short sales position selling satisfied with the first new long positions.

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