OANDA fxTrade Margin Rules
Avoid margin closeouts. Know about margin and how it works.
The OANDA fxTrade platform supports margin trading, which means you can enter into positions larger than your account balance. One advantage of margin-based trading is that you can strongly leverage the funds in your account and potentially generate large profits relative to the amount invested. The downside is that you can potentially incur significant losses in your margin capital very quickly.
What is Margin?
To ensure you can cover any losses you might incur on your positions, OANDA requires sufficient collateral. This collateral is typically referred to as margin. Although there is no minimum margin deposit required to open an fxTrade account with OANDA, the margin available in your account will limit the size of the positions you can open and will affect when you receive a margin alert and possible margin closeout. A margin closeout is the situation when the fxTrade platform automatically closes ALL of your open positions in the affected account, to significantly decrease the probability of losing more than the amount of collateral in your account.
The term leverage is often used to describe the margin requirements. A leverage of 50:1 corresponds to a margin requirement of 2% (1 divided by 50 is 0.02 or 2%). A 2% margin requirement means that, if you wish to open a new position, then you must have 2% of the size of that position available as margin. Another way of saying the same thing: for each dollar margin available you can make a 50 dollar trade.
OANDA offers a maximum leverage of 100:1, but we recommend clients cap their leverage at 20:1 or lower.
OANDA Australia's Margin Requirements
OANDA fxTrade requires a specific margin to be available in your account for each currency pair or CFD you trade in. Below you can find the list of margin rates applicable for each currency pair or CFD.
How Margin is Calculated
When you have open trades for many different currency pairs, your account’s margin requirement is calculated by weighting the margin requirements for the various trades at their respective size and rates.
If this calculation is less than the margin requirement for the leverage set on your account, it takes precedence (if it is higher, then your default leverage is used).
For example, if you are trading pairs with a minimum 3% margin rate (or 33:1 leverage) and you’ve set your leverage at 10:1, the required margin will be 10% rather than the 3% minimum required by regulation.
See more detailed information on how to calculate margin.
What Happens with a Margin Closeout?
You must maintain sufficient margin in your account to support your open positions. You are responsible for monitoring your account to prevent margin closeouts.
A margin closeout will be triggered when the Margin Closeout Value declines to half, or less than half, of the Margin Used. The fxTrade platform will try to alert customers who are signed in to the fxTrade platform when the Margin Closeout Value falls within 5% of a margin closeout, and again when the Margin Closeout Value falls within 2.5% of a margin closeout. In addition, at 4 a.m. Singapore time each trading day, OANDA will send daily emails to accounts that fall below margin requirements for their aggregate open positions and are at risk of approaching a margin closeout.
Please note: in a fast moving market, there may be little time between warnings, or there may not be sufficient time to warn you at all. Be mindful of the “Margin Closeout Percent” field in the Account Summary of the fxTrade user interface. The closer the Margin Closeout Percent is to 100%, the closer you are to a margin closeout.
If trading is unavailable for certain open positions at the time of the margin closeout, those positions will remain open and the fxTrade platform will continue to monitor your margin requirements. When the markets reopen for the remaining open positions, another margin closeout may occur if your account remains undermargined.
How to Avoid Margin Closeouts
Take proactive measures to avoid getting a margin closeout on your account. For example,
Monitor the status of your account continuously.
Use a lower leverage so you can impose a higher margin requirement on yourself. This way, you will not be tempted to enter into positions beyond your comfortable leverage level. You will also be aware of a potential margin closeout sooner, and be able to increase leverage as a last resort to head it off.
Specify a stop-loss order for each open trade to limit downside risk. You can specify the stop-loss rate at the time you issue a trade, or add a stop-loss order at any time for any open trade. You can also change your stop-loss orders at any time to take current market prices or other conditions into account. (Click on an open trade in the "Trades" table, then click "Modify" in the pop-up window to change the stop-loss.)
Note: Your trade is closed at the current fxTrade rate, which may vary from your stop loss price -- especially when trading resumes after periods of market closure.
If you happen to be close to a margin closeout, the unique features of the fxTrade platform provide some simple strategies to avoid it:
Incrementally reduce the size of your positions as you get close to a margin closeout. (fxTrade allows you to trade in arbitrary units, as opposed to fixed lots, which makes this simple to do.)
Close individual positions to reduce the amount of margin required.
If you are using a lower leverage, you can increase the leverage on your account as a last resort.
Transfer additional funds into the account from another subaccount.
Add funds to the account. Note, however, that the time it takes to add funds could mean your funds arrive too late.
The Commodity Futures Trading Commission (CFTC) limits leverage available to retail forex traders in the United States to 50:1 on major currency pairs and 20:1 for all others. OANDA Asia Pacific offers maximum leverage of 50:1 on FX products and limits to leverage offered on CFDs apply. Maximum leverage for OANDA Canada clients is determined by IIROC and is subject to change. For more information refer to our regulatory and financial compliance section.