# Forex Leverage Calculator

In this guide, we will go through how to use our forex leverage calculator to calculate the best leverage for forex. One of the main reasons why you would want to know how to calculate forex leverage is to know how much margin capital you need to open each position, reduce your overall risk, and plan your trade better.

Leverage forex trading is highly profitable but at the same time riskier than standard trading. This calls for top-level trade management and above all else, position sizing. Novice traders often struggle with knowing how much leverage to use in forex which is why many beginners get liquidated by leverage.

Most professional traders in forex are well aware of how much leverage they use, how much margin collateral they need, and what their risk is for each trade. Great risk management in leverage trading is just as important as a leverage trading strategy and by using our calculator for forex leverage you will avoid overleveraging.

## How to use the forex leverage calculator

In order to see how much money you need to deposit into your forex account to open a specific position size, follow the steps below:

1. Choose your forex pair. (eg. EUR/GBP)
6. Click Calculate.

The result you see below the calculator is the amount you need to deposit to open your position. If you already have funds in your brokerage account, this is the amount required to open the position.

To find out the best leverage ratio, see our guide on the best beginner leverage ratios.

### How to calculate forex leverage

Leveraged trading, in general, requires that the trader knows how to calculate the ratio in order to pick the best position size and the same thing goes for the forex markets.

The best way to calculate your leverage in forex is to use our calculator. It is easy to use and it never fails.

Of course, you could do it in your head or on paper but there is a chance that you miss a number and make a mistake that will cost you dearly.

The real calculation is as followed:

Position size / Leverage ratio = Margin requirement

If we take this into a real example where a trader wants to use a position size of \$150.000 at a leverage ratio of 1:200, then the margin requirement would be \$750.

150.000 / 200 = 750

These are pretty basic calculations, however, they can get more complicated if you want to trade an exotic fx pair where one currency such as the Japanese Yen is priced differently than other currencies.

This could easily confuse beginners which is why I always recommend learning how to calculate forex leverage with the use of a calculator. You will make fewer mistakes and it’s much faster.

### What is a forex leverage calculator?

A forex leverage calculator is a tool that can help you determine the amount of leverage to use in your forex trading in order to get the correct position size.

Traders use calculators to perfectly assume their total risk, the amount of money they need for their initial investment, and also to see how much volume, or size, they are able to trade.

For example, if you want to trade a lot size worth \$80.000 and have made a deposit of \$300 into your brokerage account, with a calculator you can see which ratio you need to use to get to the \$80.000 mark.

Leverage is the ratio of your account’s total value to the amount of money you have deposited. For example, if you have \$1,000 in your account and you are using a leverage of 1:50, then your total value would be \$50,000.

### How is forex leverage calculated?

Forex leverage is calculated very similarly to how it is calculated in other asset classes. First, you need to know how much margin capital you will use, then what your desired position size is, and then you can make your calculation.

To calculate the leverage of a forex position worth \$50.000 where you have made a deposit of \$650 this is the calculation.

50.000 / 650 = 77

The simple explanation for this equation is.

Total position value / Margin capital = Leverage ratio

To calculate your own forex leverage you can either use this equation or input the same details combined with your forex pair in our forex leverage calculator above.

The benefit of using a calculator will always be a much more accurate result and it’s the faster option.

### How is forex margin calculated?

To calculate your required margin capital when trading forex with leverage you need to change the equation slightly.

Here you need to divide the total position value (buying power) by your leverage ratio to know how much funds you need to deposit in order to be able to open the position size you want.

Here is a demonstration of the equation. Let’s assume you want to open a position worth \$120.000 in AUD/CAD and you want to use a leverage ratio of 1:150.

First, divide the total position value (\$120.000) by the chosen ratio (1:150).

120.000 / 150 = 800

The result of the equation is that your margin requirement is \$800 to open that position with a ratio of 1:150.

### What is a good leverage ratio for forex?

First of all, leverage is needed in forex trading to be able to make any kind of profit that is significant enough to make a difference.

Without leverage, most traders would be stuck trading micro lots and would be making between a few cents to a few dollars per trade.

The best leverage ratio for a beginner in forex is usually between 1:2 and 1:50.

Many traders will argue that a higher ratio is better because you will be able to trade much larger positions.

While this is true, a higher ratio also reduces the distance to your liquidation price.

The liquidation price is where your position would be liquidated in the case of a larger drawdown.

For example, if you trade with a ratio of 1:2 you have a liquidation price that is 50% from where you opened your fx position. This means that you can suffer a 50% loss before getting liquidated.

Now, a ratio of 1:50 has a 2% liquidation price which means that if you take on a loss bigger than 2%, your account will be liquidated.

However, a 2% move in forex does not usually happen in the course of a trading day and if you are a forex day trader you should be safe at this ratio.

Once you get experienced as a leveraged trader, you can increase the ratio, but only with the use of proper risk management.

### How much margin capital is needed to open a leveraged forex position?

The see how much margin capital is needed to open a forex position you can use our forex leverage calculator at the top of this page.

This calculator will calculate the money needed to open any position you choose, no matter the forex pair you are trading.

The information you need to know before calculating is:

• The total position value

Once you have all this information you can input it into the calculator to see how much capital is needed for your position.

However, if you want to learn how to do the calculation on your own, here is a demonstration.

Position value / Leverage ratio = Margin capital

Example. Let’s say that you want to trade JPY/USD with a position size of \$75.000 and your chosen ratio is 1:200.

75.000 / 200 = 375

This calculation indicates that your required margin capital for this forex position is \$375.

### 3 Benefits of calculating forex leverage

Most traders do not bother learning how to calculate properly when it comes to their forex trading and I think they are missing out on a big opportunity to control their risk better and learn more about how the leveraged markets work.

There are three important benefits that you get when learning how to calculate, they are:

1. You take control of your risk – Far too many traders are blindly entering into currency positions without knowing what is at stake. I’ve seen many traders using up 99.9% of their margin only to get wiped out 10 minutes after they have entered their trade. This happens due to a lack of information and poor risk management. If you know how to calculate your leverage ratios and margin requirement in forex trading, you would make far fewer mistakes and you would be better positioned to win more often.
2. You take less risk overall – When you learn how much of your margin funds go into a position you start to trade more conservatively. It is scary to realize how easily you could get wiped out by volatility in the forex markets and how easy it is to stay on the safe side. Instead of using up all your capital for one position, you can spread it out over several positions or several attempts. Leverage is a powerful multiplier and you don’t need to overleverage just to make a profit, it will happen when you score a good trade.
3. You learn more about leverage – The fact that leverage adds another dimension to your trading is somewhat difficult to understand. Therefore it is good to understand how it works. The best way to do this is to start calculating your positions to see exactly how your positions are structured. Someone who knows more earns more.

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