Stock Leverage Calculator
A crucial part of leverage stock trading is to use a stock leverage calculator to calculate how much margin capital, or collateral, is needed to open your position at a certain leverage ratio. Depending on what ratio you choose when trading with leverage you will have to more or less of your own capital to open the position.
For example, a leveraged stock position with a ratio of 1:10 leverage requires 10% of your own margin capital while a leverage position with a ratio of 1:100 leverage only requires 1% of your initial deposit.
You could see how this can be extremely valuable information seen from a leverage risk management standpoint. In order to know how much your risk per position you need to be able to calculate how much money goes into each trade.
This is especially important if you are into trading with high leverage. Start by using the calculator and follow up by reading some of our top high leverage trading strategies.
How to use the stock leverage calculator
Follow these steps to use our calculator:
- Select your stock eg. STOXX50.
- Choose your local currency.
- Select your leverage ratio.
- Add the position size (units).
- Add the current price of the asset (or leave it at market price)
- Click Calculate.
If your stock is not available, use the STOXX50 instrument and change the market price to represent the value of your stock. The calculation will be the same. For crypto traders, see our crypto leverage calculator.
For forex traders, see our forex leverage calculator.
What is a stock leverage calculator?
A stock leverage calculator is a tool that day traders use to find out how much of their own capital is needed to open a leveraged position in the stock market.
As you should know by now, to trade stocks with leverage, there are two components to each trade.
- The margin capital (your own money)
- The leverage (the borrowed money provided by your leverage stock broker)
Depending on what data you put into the calculator, it will spit out a number when you click calculate, this number is the amount of margin capital you need to enter your trade.
This is useful for traders who want to control their risk by knowing how much of their account balance is needed for each trade.
Also, it can be used when diversifying your portfolio to know precisely how much money you can allocate to different positions. It is common for day traders to open several positions at the same time and in that case you need to know how much margin you can use to maximize your efforts.
The calculator will not tell your profits, losses, or the liquidation price level. It will only tell you the margin requirements to open your trade. However, it is a great way of avoiding losing money with leverage.
How to calculate stock leverage
How is intraday stock margin calculated?
There are two different ways to calculate your leverage when trading stocks. You can do it manually or with a calculator. I personally recommend that you use a calculator because it never fails.
The things you need to know before calculating are:
- Ticker name
- Deposit currency
- The leverage ratio
- Your position size in units
- The current market price of the stock
Once you have all this information you can add it to our calculator at the top of this page.
The difference between spot trading vs leverage trading in stocks is that when borrowing money from your broker you are essntially taking a quick loan where you need to know your part of the deal, the margin requirement.
If you don’t know what ratio to use before you calculate, see our guide on the best leverage for beginners.
How much margin capital is needed to open a leverage stock position?
The amount of margin capital attached to each position is different for every trader and depending on what leverage trading strategy you are using, you will be opening positions of different sizes.
To make things easier I’ve prepared a table to show you how much margin different leveraged stock position require so you can get a rough estimation how much you need to open your position.
In the table below, the total position size is to the left and the different leverage ratios are listed at the top. See each box to know how much margin capital is needed to open each position at a different leverage ratio.
|1:5 (20%)||1:15 (6.67%)||1:30 (3.33%)||1:50 (2%)||1:75 (1.33%)||1:125 (0.80%)|
As you can see, the higher the ratio, the less money is required to open a trade.
At a leverage ratio of 1:75 you only need $333 in order to enter the stock market with a position size of $25.000.
Benefits of calculating stock leverage
Traders that are serious about using leverage to improve results and earn more money will benefit greatly from using a stock leverage calculator.
Here are the most important benefits that you should know about.
- You take full control over your risk
- You learn how leverage works
- You optimize your portfolio for each trade opportunity
- You are able to diversify
- You avoid unnessecary losses
Overall, a calculator should be used as a complementary tool when you want to know how much money you will spend on each trade.
The drawbacks of calculating your leverage when trading stocks is that you don’t know how much you could potentially lose which coud easily lead to a full account liquidation by leverage.
Frequently asked questions
30% margin means that you need to use 30% of your own margin capital to open a position. For example, if you were to open a position size of $1000 with a 30% margin requirement you would have to deposit $30.
It is not recommended to use more than 1:10 leverage in stock trading if you are complete beginner. However, short term traders are usually better off trading on a higher ratio such as 1:100 leverage due to the short time spend in the market with an open position.
The easiest way to calcualte your margin for a stock trade is to use our caluclator at the top of this page. The calculator will tell you the exact amount of money that is needed to open your position.
A good margin rate while trading stocks is between 50% and 10%. A margin rate of 50% means that you are using a leverage multiplier of 2x and a margin rate of 10% means that you are using a leverage multiplier of 10x.
Most leverage stock brokers such as CFD brokers let you hold your positions as long as you want. Keep in mind though that leverage in long-term investing should be done with low ratios to avoid paying high management fees.