Leverage up to 30:1
At XM clients have the flexibility to trade by using the same margin requirements and leverage from 2:1 to 30:1 depending on instrument.
Margin is any payment required for the purpose of entering into a CFD position and it is expressed as the percentage of the position size (e.g. 5% or 10%). For example, on a 10% margin, a position of $10,000 will require a deposit of $1,000.
So that you can open new trades, the margin level in your trading account needs to be equal or above 100%; otherwise, the new trades will result in your trading account being fully hedged.
Using leverage means that you can trade positions larger than the amount of money in your trading account. Leverage is expressed as a ratio, for instance 5:1, 10:1, or 30:1. Assuming that you have $1,000 in your trading account and you wish to trade a position on USD/JPY, the leverage ratio available to you would be 30:1. In case you decided to use $500 of your funds to enter into that position, it means that you would hold a position worth $15,000 (500 * 30).
How would it be possible to trade 30 times the amount that you have at your disposal? At XM you have a free short-term credit allowance whenever you trade on margin. This enables you to purchase an amount that exceeds your account value.
Depending on the instrument traded at XM, the leverage ranges from 2:1 to 30:1. Margin requirements do not change during the week, nor do they widen overnight or at weekends.
On the one hand, by using leverage, even from a relatively small initial investment you can make considerable profit. On the other hand, your losses can also become drastic if you fail to apply proper risk management.
At XM you can control your real-time risk exposure by monitoring your used and free margin.
Used and free margin together make up your equity. Used margin refers to the amount of money you need to deposit to hold the trade (e.g. if the leverage offered for a specific instrument you wish to trade on is 20:1, the margin that you will need to set aside is 5% of your trade size). Free margin is the amount of money you left in your trading account, and it fluctuates according to your account equity. You can open additional positions with it or absorb any losses.
Although each client is fully responsible for monitoring their trading account activity, XM follows a margin call policy to guarantee that your maximum possible risk does not exceed your account equity.
As soon as your account equity drops below 100% of the margin needed to maintain your open positions, we will attempt to notify you with a margin call warning you that you do not have sufficient equity to support open positions.
The stop-out level refers to the equity level at which your open positions get automatically closed. The stop-out level in a retail client’s account is reached when the equity in the trading account is equal or falls below 50% of the required margin.