Jump to content

leverage calculation & formula


Recommended Posts

Hi

Recently started with IG Index. Wanted to place a bet on a $10 share, at $100 a point. I had deposited $10,000 in my account to fund this bet. Since you can't go into negative equity this limits my risk to losing $10K.

When I tried to place the bet I had an error saying something along the line of "the exposure was too high for the margin? blah blah blah"

Consequently I manually adjusted the bet down incrementally until I got to $15 a pip at which point the IG platform allowed me to place the bet. The price moved in my favour by 70 points and I made a profit of $1,050 based on the capped bet of $15 per pip. But I should have made $100 x 70 = $7,000. So the cap cost me $6,000 !

This cap on leverage is incredibly costly, annoying and I can't see how it is calculated?

I know people will say the cap is there to protect the small investor, but if I calculate what I can afford to lose and bet accordingly I do not need a nanny state limiting my bets. Last time I checked there was no one policing bets on horses where you can hapilly stick £10K on luckyboy to win at Cheltenham?

Question: please can you give an example how to calculate the maximum bet based on a formula which includes the affect of levarge cap restrictions.

Question: What effective ways are there to increase your leverage? i) deposit more money in your account? ii) open an international spread bet account where ESMA regulations don't apply? Etc etc? Please provide details.

Thanks

Z

Edited by ZeliZeli
typo
Link to post

ZeliZeli - good question, I wish I could answer it... By the way, I am new to IG and want to understand how IG calculates our profits or losses on trades. Do you have any example calculations so I can see all the expenses?

Link to post
On 07/08/2020 at 08:50, ZeliZeli said:

Hi

Recently started with IG Index. Wanted to place a bet on a $10 share, at $100 a point. I had deposited $10,000 in my account to fund this bet. Since you can't go into negative equity this limits my risk to losing $10K.

When I tried to place the bet I had an error saying something along the line of "the exposure was too high for the margin? blah blah blah"

Consequently I manually adjusted the bet down incrementally until I got to $15 a pip at which point the IG platform allowed me to place the bet. The price moved in my favour by 70 points and I made a profit of $1,050 based on the capped bet of $15 per pip. But I should have made $100 x 70 = $7,000. So the cap cost me $6,000 !

This cap on leverage is incredibly costly, annoying and I can't see how it is calculated?

I know people will say the cap is there to protect the small investor, but if I calculate what I can afford to lose and bet accordingly I do not need a nanny state limiting my bets. Last time I checked there was no one policing bets on horses where you can hapilly stick £10K on luckyboy to win at Cheltenham?

Question: please can you give an example how to calculate the maximum bet based on a formula which includes the affect of levarge cap restrictions.

Question: What effective ways are there to increase your leverage? i) deposit more money in your account? ii) open an international spread bet account where ESMA regulations don't apply? Etc etc? Please provide details.

Thanks

Z

The regulator (ESMA) sets the margin (leverage) limit so to only way to avoid it is to open an account outside of ESMA's reach, that would have been Australia as choice but their regulator is set to follow ESMA's example and lower leverage too.

Link to post

Hi, please use glowing yellow in your next question, it hurts way more to the eyes.

This is how you can calculate the PL for a position.

image.thumb.png.84c0c47be52776e6e66ab34c81cd3d67.png

To calculate the required margin for a trade you need to look at the market margin factor, i.e Wall Street

image.png.49c18106f9f03d15a4d507bfbd003449.png

You will need to multiply the side price by the margin factor and by the bet size

image.png.ffe7e8d1d0ca07070339e616c312d211.png 

 

  • Great! 1
Link to post

I am still trying to understand how profits/losses on trades are calculated because I am not sure about some of the expenses that I am incurring... For example, I was recently charged about A$49 for "Daily FX Interest for 3 day USD/JPY converted at 0.0133" - an someone please explain to me what this means and how it is calculated?

Link to post

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • General Statistics

    • Total Topics
      14,881
    • Total Posts
      72,404
    • Total Members
      60,744
    • Most Online
      5,137
      14/01/21 09:51

    Newest Member
    DirtyDiorite
    Joined 11/04/21 04:16
  • Posts

    • @Courage Thanks for that input, I am following this one. Being a newbie what news days and countries are best to look out for and what days are the big mover news days. Thanks
    • Spot on. The FX market is “influenced by policy makers through the purchase or sales of bonds  “ their mandate is to keep the confidence in their respective economies as high as possible.   That confidence is what the Fiat monetary system is based on, the moment that goes the system evaporates. If you recall a few years ago during Theresa Mays government, the key phrase was strong and stable? . That's their mandate. They can't let a currency move too far towards one extreme or the other.     So if you wana make money on fx you need to extend your time horizon or take the other position when things go too far into one extreme. I am only 32 but remember I  the dollar decline and the dollar inflation story that has been around for along time now. It's the same old story once you realise it's the new cycle, you learn to side step it and focus on what's important and that's the economy. Economic strength expresses itself in currency strength. Focus on that and you will get the big moces right. 
×
×
  • Create New...