The share of a position's notional value a broker requires you to post as collateral, quoted either as a percentage such as 3.33% or as a leverage ratio such as 30:1.
The two formats are the same number upside down: a 30:1 cap is a 3.33% requirement, 50:1 is 2%, 20:1 is 5%, 2:1 is 50%. Requirements are set per instrument, so the majors, a thin exotic and a single-share CFD can all sit on the same account with very different rates.
The requirement is calculated on notional in the base-currency, converted into the account-currency at the time of opening. Many brokers recalculate it if the rate moves a long way, and most raise it around known events or ahead of a weekend.
Requirements are a floor, not a plan. Meeting the minimum on every trade is what produces an account that cannot survive a normal losing streak.
Example: 1 standard-lot of EUR/USD is EUR 100,000, which at 1.0840 is $108,400 of notional. At 30:1 the requirement is 3.33%, or $3,613. At 50:1 it is $2,168.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
Educational only, not advice. Spotted an error? Post in Site Feedback.