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Dynamic Margin

Discover how dynamic margin significantly impacts the management of your positions.

What is Dynamic Margin?

Dynamic margin provides a systemic approach to calculating margin requirements, ensuring that the margin rates align with your position size and hedging strategy. It allows for greater flexibility and precision in managing your trading portfolio while maintaining risk management standards.

Key Features of Dynamic Margin

Position Size significance

Position size, or market exposure, is crucial in determining margin requirements. The larger your market position, the more margin you need.

Adaptable margin rules

Dynamic Margin rules apply to all open positions. This means you can have open positions across different markets and still benefit from the lowest margin rates listed below.

Pending Orders

Pending orders that are activated will have their margin requirements modified based on current rates. When the order is executed, the margin reflects these dynamic rates.

Hedged Positions

Hedged positions come with a unique feature— they require only 50% of the margin requirement compared to equivalent unhedged positions.

Managing
Hedged Positions 

When dealing with partially or fully hedged positions, you should keep in mind: The hedge side of a trade can be closed (fully or partially) only if the remaining free equity in the account post-closure is sufficient to cover the revised margin requirements. Alternatively, you may need to top up your account to maintain sufficient equity or close both sides of the hedged trade with realised losses.

Examples of Dynamic Margin

01

Example

A trader holds a long position of 1 lot in a major cross with a $1,000 margin requirement.

  • Under a fixed margin system, the requirement remains fixed at $1,000.
  • With dynamic margin, the requirement is $1,000.

02

Example

A trader holds a short position of 20 lots and a long position of 10 lots in the same market, resulting in a hedged position.

  • Under fixed margin: $20,000.
  • Under dynamic margin: $15,000 ($10,000 for the short position + $5,000 for the hedged position at 50%).

03

Example

A trader holds a long position of 20 lots, then partially hedges by selling 10 lots. Later, the Trader removes the hedge by buying back 10 lots.

  • Initial dynamic margin requirement: $30,000 (1% for the first 10 lots, 2% for the next 10 lots).
  • After hedge placed: $15,000 ($10,000 for short position + $5,000 for hedged position at 50%).
  • Once the hedge is removed: the margin reverts back to $30,000.

Dynamic Margin Rates by Asset

Forex

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Indices

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Commodities

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Disclaimer

Tradu is a trading name of Tradu Limited and is part of a group of affiliated companies operating in multiple jurisdictions.
Tradu is regulated by the Seychelles Financial Services Authority (FSA) with license number SD147.
Registered address: Block B, Global Village, Jivan’s Complex, Mont Fleuri, Mahe, Seychelles
Tradu is regulated by the UK Financial Conduct Authority (FCA) with registered license number 217689.
Registered address: 125 Old Broad Street Ninth Floor, London EC2N 1AR, UNITED KINGDOM
Risk Warning
Trading financial instruments involves a high degree of risk and may not be suitable for all investors. The value of investments may fluctuate and there is also a risk of losing the entire amount of invested capital, especially when using leverage. Before trading any financial instrument, including on margin, you should carefully consider your investment objectives, level of experience and risk tolerance. It is your responsibility to fully understand the risks involved and seek independent professional advice if necessary. We strongly recommend that you obtain independent financial, legal and tax advice before engaging in any trading activity or using copy trading. The contents of this site should not be construed as investment advice by Tradu or any of its affiliates, directors, officers or employees.
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