Academy of Financial Trading

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An explanation of some topics helpful to the up and coming trader

Risk Warning

Any Advice or information provided by the Academy of Financial Trading is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By viewing any material provided by the Academy of Financial Trading or using any information or tools you agree that this is general educational material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by The Academy of Financial Trading, its employees, directors or fellow members. Futures, Contracts for Difference (CFDs), Options, and spot currency trading have large potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest in CFDs and leveraged forex markets. Don't trade with money you can't afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material provided by the Academy of Financial Trading. The past performance of any trading system or methodology is not necessarily indicative of future results.

An explanation of Leverage

Why do we as traders concern ourselves with leverage?

I. Leverage is a way for us to gain access to capital markets which would otherwise be out of reach.

II. Large financial institutions may or may not need this due to their capital available to invest/risk.

III. Is leverage a risk? Leverage is a risk, as is any contract you trade but we can take a different perspective on the same.

IV. Leverage is given in specific rates/differences that very from broker to broker and from asset class to asset class.

V. Don’t assume you know what your leverage is.

How to calculate leverage and hence our ‘margin requirement’ in three different asset classes?

So firstly, what is our margin requirement – what does it mean?

Our margin requirement is the amount we must deposit or have within our account to trade a given amount of an instrument.

If we quickly look at the below tables let’s get an understanding for how a brokerage may present this to us.

Now the calculations! Aaaahh, Maths!

We saw in the table on the last page that the margin requirement for Crude Oil is 1%

So what does that mean.

Well, it means that for every contract of oil I trade I must have 1% of the monetary value of that contract deposited in my account.

For Apple:

We saw that this brokerage was offering us a margin of 5%

Similarly, this means for every contract of Apple I trade I must have 5% of the monetary value of that contract available.

And what about Forex – Currency Pairs.

On EurUsd we were offered a margin requirement of 0.50%.

So for every contract of EurUsd I trade I must have 0.50% of the monetary value of that contract deposited in my account.

A worked exampleCrude Oil.

Suppose I want to buy one contract of Crude Oil which is 100 barrels.

The going price of Crude Oil is $44 dollars.

So the actual monetary value of this is $44  × 100 which is $4,400.

A little expensive!

However, we know our broker is offering us a margin requirement of 1% of this contract in monetary terms.

This means that with $44 deposited in my account I can actually trade Crude Oil.

Q & A

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Thank you!

Contact us anytime on

Ire: +353 (0) 1 553 0174UK: +44 (0) 207 760

1614USA: +1 347 627 0001

Keep Learning!

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