What is Dynamic Leverage

Dynamic leverage is a flexible mechanism that allows traders to adapt to the changing market conditions and adjust their trading strategies accordingly. Unlike fixed leverage, where the ratio remains constant, dynamic leverage fluctuates based on the size and type of the positions being traded. This facilitates a more pliable and responsive trading environment.

How Dynamic Leverage Works

Dynamic leverage is ingeniously designed to change as per the trading volume. For every position opened, the leverage automatically adjusts, resulting in concurrent changes in margin requirements. Below illustrates the Dynamic Leverage mechanism:

  • Automatic adjustment: Leverage changes in real-time, corresponding with the size of the open positions. It aids traders in managing risk and capital more effectively.
  • Responsive to market conditions: During significant economic news announcements, dynamic leverage ensures that traders are not overly exposed.

 

Calculating Margin with Dynamic Leverage

How much margin is required to open a long position of 20 lots on EURUSD using Dynamic Leverage?

Consider a Euro account
Contract size 100000
EURUSD Price 1.07213

3 Lots with 1:2000 Leverage = 3*100000/2000=€150
7 Lots with 1:1000 Leverage = 7*100000/1000=€700
10 Lots with 1:500 Leverage = 10*100000/500=€2000

The margin required to open 20 Lots of EURUSD will be
€2850


*Note: The margin required will be displayed in the account’s currency.

Same example for USD trading account.

3 Lots with 1:2000 Leverage = 3*100000*1.07213/2000=$160.82
7 Lots with 1:1000 Leverage = 7*100000*1.07213/1000=$750.49
10 Lots with 1:500 Leverage = 10*100000*1.07213/500=$2144.26
The margin required to open 20 Lots of EURUSD with a USD account will be
$3055.57


Margin = lots x contract size x rate / leverage size
*Note: The margin required will be displayed in the account’s currency.

“Dynamic Leverage automatically adjusts your leverage and margin based on your open position”.
How much margin is required to open a long position of 3 lots on EURUSD, a long position of 5 lots on GBPUSD and a long position of 5 lots on USDJPY using dynamic leverage?

Consider a USD trading account
EURUSD price 1.07213
GBPUSD price 1.24696
USDJPY price 147.239
Contract size 100000
3 lots EURUSD with 1:2000 Leverage (Tier 1) = 3*100000*1.07213/2000=$160.82
5 lots GBPUSD with 1:1000 Leverage (Tier 2) = 5*100000*1.24696/1000=$623.48
2 lots USDJPY with 1:1000 Leverage (Tier 2) = 2*100000/1000=$200
3 lots USDJPY with 1:500 Leverage (Tier 3) = 3*100000/500=$600
The margin required will be 160.82+623.48+200+600 =
$1584.3
How much margin is required to open a long position of 3 lots on EURUSD, a long position of 7 lots on GBPUSD, a long position of 1 lot on USDDKK and a long position of 10 lots on USOIL using dynamic leverage?

Consider a USD trading account
EURUSD price 1.07213
GBPUSD price 1.24696
USOIL price 89.93
Contract size 100000

3 lots EURUSD with 1:2000 Leverage (Tier 1) = 3*100000*1.07213/2000=$160.82
7 lots GBPUSD with 1:1000 Leverage (Tier 2) = 7*100000*1.24696/1000=$872.87
1 lot USDDKK with 1:200 Leverage (Exotic FIX Leverage) = 1*100000/200=$500
10 lots USOIL with 1:200 Leverage (Energies FIX Leverage) = 10*100*89.93/200=$449.65
The margin required will be
$1983.34
Margin calculation for hedged positions using Dynamic Leverage

How much margin is required to open a long position of 20 lots on EURUSD and a short position of 20 lots on EURUSD using Dynamic Leverage?

Consider a USD trading account
Contract size 100000
EURUSD Price 1.07213

3 Lots BUY with 1:2000 Leverage = 3*100000*1.07213/2000=$160.82
7 Lots BUY with 1:1000 Leverage = 7*100000*1.07213/1000=$750.49
10 Lots BUY with 1:500 Leverage = 10*100000*1.07213/500=$2144.26
20 Lots SELL = $0
The margin required to open 20 Lots BUY of EURUSD and 20 Lots SELL of EURUSD with a USD account will be
$3055.57
. (Hedged positions are charged 50%)