Leverage up to 30:1
At XM clients have the flexibility to trade by using the same margin requirements and leverage from 1:2 to 30:1 depending on instrument.
About Margin
Margin is any payment required for the purpose of entering into a CFD position and it is expressed as the percentage of the position size (e.g. 5% or 10%). For example, on a 10% margin, a position of $10,000 will require a deposit of $1,000.
For Forex, Gold and Silver, new positions can be opened if the margin requirement for the new positions is equal or less than the free margin of the account. When hedging, positions can be opened even when the margin level is below 100% because the margin requirement for hedged positions is Zero.
For all other instruments, new positions can be opened if the margin requirement for the new positions is equal or less than the free margin of the account. When hedging, margin requirement for the hedged position is equal to 50%. New hedged positions can be opened if the final margin requirements will be equal or less than the total equity of the account.
Margin for Cash and Future Index & Cash Energy CFDs
At XM, leverage on Cash and Future Index & Cash Energy CFDs adapts automatically. The leverage you receive will be the lowest between (i) your trading account leverage and (ii) the leverage of the CFD symbol being traded.
Margin calculations are done on a per instrument basis. This means, when you open positions on multiple instruments, the margin is calculated separately for each position.
Below, you can see examples of how dynamic margin is calculated for Cash and Future Index & Cash Energy CFDs. Please note, these examples are for illustrative purposes only and should not be used for trading calculations.
Margin Requirement = [Lots*contract size* open price] / [Lowest of (Account Leverage, Symbol Leverage)]
As the formula above indicates, the leverage of the position is the lowest between the Account Leverage and the specific Symbol Leverage.
Example 1: Client trades 10 lots of US30Cash at 34,500 USD opening price, with USD account base currency, and account leverage 200:1. At the same time, symbol leverage for US30Cash is 500.
Required margin for US30Cash position (Example 1) = (10*1*34,500) / 200 = $1,725
Example 2: Client trades 15 lots of US30Cash at 34,500 USD opening price, with USD account base currency, and account leverage 888:1. At the same time, symbol leverage for US30Cash is 500.
Required margin for US30Cash position (Example 2) = (15*1*34,500) / 500 = $1,035
About Leverage
Using leverage means that you can trade positions larger than the amount of money in your trading account. Leverage is expressed as a ratio, for instance 5:1, 10:1, or 30:1. Assuming that you have $1,000 in your trading account and you wish to trade a position on USD/JPY, the leverage ratio available to you would be 30:1. In case you decided to use $500 of your funds to enter into that position, it means that you would hold a position worth $15,000 (500 * 30).
How would it be possible to trade 30 times the amount that you have at your disposal? At XM you have a free short-term credit allowance whenever you trade on margin. This enables you to purchase an amount that exceeds your account value.
XM Leverage
Depending on the instrument traded at XM, the leverage ranges from 2:1 to 30:1. Margin requirements do not change during the week, nor do they widen overnight or at weekends.
Leverage Risk
On the one hand, by using leverage, even from a relatively small initial investment you can make considerable profit. On the other hand, your losses can also become drastic if you fail to apply proper risk management.
This is why XM provides a leverage range that helps you choose your preferred risk level. At the same time, we do not recommend trading close to a leverage of 30:1 due to the high risk it involves.
Margin Monitoring
At XM you can control your real-time risk exposure by monitoring your used and free margin.
Used and free margin together make up your equity. Used margin refers to the amount of money you need to deposit to hold the trade (e.g. if the leverage offered for a specific instrument you wish to trade on is 20:1, the margin that you will need to set aside is 5% of your trade size). Free margin is the amount of money you left in your trading account, and it fluctuates according to your account equity. You can open additional positions with it or absorb any losses.
Margin Call
Although each client is fully responsible for monitoring their trading account activity, XM follows a margin call policy to guarantee that your maximum possible risk does not exceed your account equity.
As soon as your account equity drops below 100% of the margin needed to maintain your open positions, we will attempt to notify you with a margin call warning you that you do not have sufficient equity to support open positions.
Stop-Out Level
The stop-out level refers to the equity level at which your open positions get automatically closed. The stop-out level in a retail client's account is reached when the equity in the trading account is equal or falls below 50% of the required margin.
