# Chapter 5, Part IV. Spread, Lots, Leverage/margin and profit/loss – joining all... Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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1. ### Sive Morten Special Consultant to the FPA

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Assume that your broker provides 100:1 Leverage and you intend to open 1 standard lot in EUR/USD at 1.32, two standard lots in USD/CHF at 1.08 and one standard lot in NZD/JPY at 63.00. How much money should you have in your trading account to be able to open all these positions?

Pipruit: Hm, I see one problem with this task. More properly, a couple of problems…​

Commander in Pips: And what are they?

Pipruit: First, I need to know in what currency I should make my initial margin deposit with. Second, I need to know cross rates of my positions to this currency, otherwise I could not estimate the initial margin requirements with just single currency.​

Commander in Pips: You’re right, Son. You are becoming a real professional before my eyes. Ok, say, you have to make that initial deposit in USD. The USD/JPY rate is 82.50

Pipruit: Ok, let’s see then. The first step is to calculate the value of all positions in their quote currencies:

1. EUR/USD 1 lot at 1.32: 100 000*1.32 = 132 000 USD;

2. USD/CHF 2 lots at 1.08: 200 000*1.08 = 216 000 CHF;

3. NZD/JPY 1 lot at 63.00: 100 000*63.00 = 6 300 000 JPY.

On the second step we should convert all these sums in USD:

1. 132 000 USD demands no conversion;

2. 216 000 CHF at 1.08 rate equals 216000/1.08 = 200 000 USD;

3. 6 300 000 JPY at USD/JPY=82.50 equals 6 300 000/82.50 = 76 363 USD.

So, totally we have position of 132 000 + 200 000 + 76 363 = 408 363 USD.

Well and know is quite simple – the leverage is 100:1, then, we would need –

408 363USD/100 = 4083.63 USD.

Commander in Pips: Well done, son. But you made one operation that was absolutely unnecessary...

Pipruit: I know, Sir. I forgot that the number of lots shows the quantity of units of Base currency. So, as my deposit’s currency coincides with base currency there is no need for conversion operations as with USD/CHF pair. My deposit in USD and the Base currency in USD/CHF also is USD, so I just have to take number of lots of this pair. That’s all.​

Commander in Pips: Yes, but this is insignificant mistake. I might say that this is not really a mistake at all, just an unnecessary extra step operation. But overall, your calculation is correct.

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Last edited: Dec 15, 2013
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