How a Margin Account Works | Margin Trading Calculator

Confused on Margin Trading Calculation....

So I have a margin position open:
- 200 EOS - Base $5.24
200 EOS x $5.24 = $1048 x 15% min equity = $157
My margin USD balance shows the total and then available. Say I have $1000 balance. Does it mean it will "hold" onto $157 as my equity requirement and then have $843 available? The numbers are throwing me off as I'm not sure how to calculate it. So what is my liquidation amount that I lose my $157 or is it my entire $1000? I'm confused.
submitted by patoshii to bitfinex [link] [comments]

Margin Trading Calculations

Hey guys can someone please help me figure out how exchanges calculate P/L percentage wise. I have open leveraged positions at 2:1 and 3:1. Let's suppose I bought 100 ETH at 10.25 using 2:1 leverage, how do I calculate if the profit is correct percentage wise? I believe they're a little low. Please explain if it was with 3:1 leverage as well if you can. Appreciate all the help. 😉
submitted by ASG3 to ethtrader [link] [comments]

Margin trading, calculating and maintaining adequate margin

Hello all, I recently switched my account over to a margin account and I am a little confused on how to calculate the amount required to maintain margin. Margin requirement is 30%.
In a scenario where say I have 10k cash in my account, which would mean my total buying power is 20k. Would I multiply .7 against the 10k being loaned to me and then add to my cash balance to determine the amount I could use for trading or would .7 be multiplied against total buying power?
submitted by allTestsPassed to investing [link] [comments]

Beginners question: when margin trading, the funding fee is calculated on the leveraged amount, so if I buy for 100 with 10x then 0.5 % funding fee would be 5, meaning actually 5% of my investment. Is that a correct assumption/calculation?

It's all in the title basically. I was surprised that such a big absolute amount gets substracted.
submitted by nohiddenmeaning to binance [link] [comments]

Question about calculating margin trading interest.

Just wondering the way to figure out how much interest you pay on a borrow? Is it the amount of coins x the percentage rate and then divided by the number of days? So if you borrow 1000usdt at 0.192 % for 28 days would that mean you would pay $6.85 for the total amount of days or is that each day?
submitted by jleist007 to kucoin [link] [comments]

Idea for another trading tool

Will be really helpfull to have an access to margin trading calculator. For example you will put lavarage, base price etc and how many you will earn if price will go up or dow for 100satoshi
or something like this exists?
submitted by lukaut to BitcoinMarkets [link] [comments]

@cz_binance: No margin interests where charged during the trading pause, and the interest calculations will only be turned after everything is back to normal.

@cz_binance: No margin interests where charged during the trading pause, and the interest calculations will only be turned after everything is back to normal. submitted by rulesforrebels to BinanceTrading [link] [comments]

What are some good trade/portfolio tracker options (that can also calculate for margin wallet)?

submitted by viccity1 to binance [link] [comments]

Trading tool: handy margin calculator

submitted by flexd to Eve [link] [comments]

Trading 100s of transactions per day - how is the margin calculated?

Let's say I have 10k USD in my margin account. I place 100 round trip orders in a single day, each worth 2000 USD (999 USD buy order and 1001 USD sell order).
How much margin did I use at the end of the day? Can I do as many 2000 USD round-trips a day as I like?
I am trying to understand how I can do frequent day trading without running into an issue with unsettled funds. I am interested in an answer both relating to stock and forex trading, and any other instrument that settles instantly or otherwise allows me to trade 100s of round-trips each day.
submitted by Viennaguy to Forex [link] [comments]

How to is the "Tradable Balance" calculated when Margin Trading ?

Does someone has the exact formula that allow you to calculate your "Tradable balance" on BitFinex based on your collateral in Margin Wallet, open positions and open orders ?

Initial equity is 30%. This means the USD value of the funds you hold in your Margin wallets need to be at least 30% of the USD value of the position you wish to open.
So if you have 1000 USD in your margin wallet. Those 1000 USD will serve as collateral for opening margin positions up to 3.33:1. IE a margin position with a USD value up to 3333.33 USD.
If you wish to use 2x leverage only, the size of your position should only be worth 2000 USD.
When holding 1000 USD your tradable balance will be 1000 * (1 / 0.3) = 3333.33 USD

This is the only info I found in the documentation. But this doesn't take into account open Margin positions and open Margin Orders.
submitted by Mishichi to bitfinex [link] [comments]

How to calculate cost basis on margin trading?

I'm writing a program to figure out my taxes owed for 2017 and also to understand when my crypto purchases are eligible for long-term capital gains. I did some heavy margin trading and I'm not sure how these trades should be calculated.
Let's say I bought 100 ETH in March 2017. Using FIFO, these would become long-term capital gains in March 2018. Easy peasy.
Let's now say that I margin traded on borrowed USD (went long, closed position, rinse repeat) for more than 100 ETH later in that year.
If I'm using FIFO, when I close my position (sell ETH) does this change the long-term capitals gains date of my initial pool of 100 ETH? Or is margin trading treated completely different in it's own separate pool?
Any advice in general in calculating margin trading taxes is much appreciated. Thank you!
submitted by _otpyrc to CryptoTax [link] [comments]

E-Trade Question - How is margin calculated with respect to maximum loss?

Sorry in advance for asking what might be a trivial question and one that is only applicable to a small group, but I've never used my margin power and I'm curious if I can get an answer before the weekend is over.
Question: How does E-Trade calculate margin if I run a spread / strategy where my maximum risk is greater than my cash on hand, but less than my margin power?
For example: I have $5,000 worth of stock in my account and $0 cash, but also $10,000 of margin buying power. If I open a bear call spread with an immediate credit of, say, $4000, but carry a maximum risk of, say, $6,000, does E-Trade reserve $6,000 of margin for my maximum loss? If so, does that cost me anything?
Just thinking logically I'd assume they flat out don't let you take risk greater than your cash+margin balance, but when do they charge interest on use of margin? Is it when you put the money at risk, or when you actually spend it?
submitted by Drunken_Dino to options [link] [comments]

After calculating margin trade profit, how should it be recorded for taxes?

I've manually calculated my BTC profits from margin long positions for the year. How would I show this on taxes?
Lets say you have 1 BTC profit from margin longing ETH/BTC. What is the correct way to identify this trade on bitcoin.tax?
Also, is it true you can declare margin trades as a CFD and count the profit as income rather than capital gains?
submitted by BattleChimp to bitcointaxes [link] [comments]

Margin trading P/L calculation

Can somente explain step by step how the profit of a margin trade is calculated? It seems to be less than i expected. For example, shorting 1 btc from 10.000 to 9900 with 1:3 leverage.
submitted by justanotherlogin to cexio [link] [comments]

[Noob Question] Can someone explain how to calculate margin trading profit in a simple terms please

Sorry for the Noob question ahead of time. I understand it is risky and all. I am just curious, how do you calculate the profit from margin trading for an example like this one.
I have 1000 ether (at 50 USD each, which is a total of 50,000 USD) and I borrow 1000 ether more. Now I am at 2000 Ether in total. Can someone explain the rest. In a profit/loss calculation?
Please and thank you.
submitted by golden-china to ethtrader [link] [comments]

I paid $1000 for an Adam Khoo investing course so you don't have to! (Summarized in post)

Lesson one is "stock basics" summarized: (2 videos) for every buyer there's a seller, for every seller there's a buyer, fear and greed drives prices, what fundamental analysis means, what technical analysis means.
lesson 2 is ETFs summarized: (video 1) Bull markets are opportunities, bear markets are bigger opportunity's, Bear markets never last, always followed by bull market. (video 2) The market is volatile in the short term in the long term it always goes up, what an ETF is, different types of ETF indexes. (video 3) Expands on the different types of ETFs (bonds, commodities etc). (video 3) A 35min video on dollar cost averaging lol. (Video 5) summarizing the last 4 videos.
Lesson 3 is Steps to investing summarized: (video 1) A good business increases value over time, a valuable business has higher sales, earnings and cashflow. (video 2) invest in businesses that are undervalued or fairly valued, stocks trade below its value because investors have negative perception of the company
lesson 4 Financials summarized (all 4 videos) where to find financials, how to use a website (Morning Star) to screen stocks, how good is the company at making money, Look for companies that have growing revenue, check growth profit margin and net profit margin of company compared to industry.
Lesson 5 Stock Valuation summarized (2 videos) go here: https://tradebrains.in/dcf-calculato and look at what the calculator is asking for, go to Morning Star find the needed numbers that are required, bam you got the intrinsic vale.
Lesson 6 Technical Analysis summarized: (all 4 videos) What are candles sticks, what do they mean, support and ceilings, consolidation levels.
Lesson 7 The 7 step formula summarized: (3 videos) See what I wrote in lesson 3 and lesson 5.
lesson 8 Winning portfolio summarized summarized: (video 1) Diversify, keep portfolio balanced, different sectors (video 2) More sectors, Dividends (video 3) More on sectors, more on dividends, what are different stock caps (large cap, small cap etc)
Lesson 9 finding opportunities summarized: (video 1) see lesson 3, (video 2) creating a watch list,monitor news, company announcements, stock price, financials
Lesson 10 psychology of success summarized: (2 videos) basically: common sense.
Lesson 11 Finding a broker summarized: (1 video) look at fees and commissions, see minimum deposit, check margin rates, make sure it has a good trading platform.
I just saved you 18 hours and $1000.
submitted by swagbasket34 to investing [link] [comments]

Does anyone has a very helpful guide on how Kraken calculates all of the numbers related to margin trading. I know I sound foolish but I studied Business and economics but I need some explanation

submitted by VLADIMIROVIC_L to Bitcoin [link] [comments]

Does anyone has a very helpful guide on how Kraken calculates all of the numbers related to margin trading. I know I sound foolish but I studied Business and economics but I need some explanation /r/Bitcoin

Does anyone has a very helpful guide on how Kraken calculates all of the numbers related to margin trading. I know I sound foolish but I studied Business and economics but I need some explanation /Bitcoin submitted by BitcoinAllBot to BitcoinAll [link] [comments]

How to calculate the amount of margin for a trade?

submitted by KiaraFinnan to Forex [link] [comments]

Former investment bank FX trader: some thoughts

Former investment bank FX trader: some thoughts
Hi guys,
I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert.
I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning.
When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions.
The first topic is Risk Management and we'll cover it in three parts
Part I
  • Why it matters
  • Position sizing
  • Kelly
  • Using stops sensibly
  • Picking a clear level

Why it matters

The first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.”
You have to keep it before you grow it.
Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around.
The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices.
Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners.

Capital and position sizing

The first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose.
Position sizing is what ensures that a losing streak does not take you out of the market.
A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples.
So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000.
We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be?
We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator".

https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14
So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital.
You should be using this calculator (or something similar) on every single trade so that you know your risk.
Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later.
The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work.
As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you.
Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints.
For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly:

https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b
To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you.
Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown.
It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance.
Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k.
Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money.
Do not let this happen to you. Use position sizing discipline to protect yourself.

Kelly Criterion

If you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number?
The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round.
This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet.
Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin.
Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips.
Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds.
Applying the formula to forex trading looks like this:
Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio
If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically.
If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss.
So that’s 0.3 - (1 - 0.3) / 3 = 6.6%.
Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit!
With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not.
Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account.
Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see.
This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders.
Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
  • How many live trades have you done? Often they’ll have done only a handful of real trades and the rest are simulated backtests, which are overfitted. The model will soon die.
  • What is your risk-reward ratio on each trade? If you have a take profit $3 away and a stop loss $100 away, of course most trades will be winners. You will not be making money, however! In general most traders should trade smaller position sizes and less frequently than they do. If you are going to bias one way or the other, far better to start off too small.

How to use stop losses sensibly

Stop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them.
A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter.
The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’.
This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK.
Why are stop losses so important? Well, there is no other way to manage risk with certainty.
You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter.
Learning to take a loss and move on rationally is a key lesson for new traders.
A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not.
Bruce Kovner, founder of the hedge fund Caxton Associates
There is an old saying amongst bank traders which is “losers average losers”.
It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong.
Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops.

Picking a clear level

Where you leave your stop loss is key.
Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible.

If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop
You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200.
The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up.
Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD.

https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802
If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend.
So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level.
There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section.
There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high.

https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81
Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument.
Here are some guidelines that can help:
  1. Use technical analysis to pick important levels (support, resistance, previous high/lows, moving averages etc.) as these provide clear exit and entry points on a trade.
  2. Ensure that the stop gives your trade enough room to breathe and reflects your timeframe and typical volatility of each pair. See next section.
  3. Always pick your stop level first. Then use a calculator to determine the appropriate lot size for the position, based on the % of your account balance you wish to risk on the trade.
So far we have talked about price-based stops. There is another sort which is more of a fundamental stop, used alongside - not instead of - price stops. If either breaks you’re out.
For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market.

Coming up in part II

EDIT: part II here
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Risk:reward ratios
Risk-adjusted returns

Coming up in part III

Squeezes and other risks
Market positioning
Bet correlation
Crap trades, timeouts and monthly limits

***
Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
submitted by getmrmarket to Forex [link] [comments]

Conservative Margin Lending - A tool to use, and a reason to invest outside of Super

Conservative Margin Lending - A tool to use, and a reason to invest outside of Super
Hi AusFinance, i thought i would write on a topic i'm rather passionate about, and hopefully offer some 'food for thought' and an alternative to the standard answers of 'Super is the best environment for your money'.
Disclaimers:
  1. this is not financial advice, i am merely trying to offer some food for thought
  2. these examples are greatly simplified, they do not take into account interest rate risk, legislation risk (both on super, on changes to tax, etc..).
  3. The case study below does not take into account the ability to margin lend inside super. the ability is there, such as Bell Potter's Equity Lever platform, but this is not available to your average retail/industry super, hence it is excluded.
Margin lending for the uninitiated:
For those of you unaware, margin loans are borrowing to invest. Your shares/fund units act as security that let you borrow money to buy more shares/fund units. These are given different levels of "Loan to Value Ratio" aka LVR.
a 75% LVR means you can make up a total investment with a minimum of 25% your money, and a maximum of 75% borrowed money. So with $2,500 you'd be able to borrow up to $7,500 (Making up a total portfolio of $10,000).

Why borrow to invest?
Simply put, Margin lending amplifies your gains and your losses. I have included a table below to demonstrate what a margin loan will do to a $25,000 investment at an 8% p.a. return at different LVRs. I am using Leveraged Equities variable 4.24% interest rate on their direct investment loan as the interest cost - the product offers access to the vast majority of funds and shares that an investor needs, it's just lacking advanced features like options trading (who cares!)

https://preview.redd.it/42p6co191lb51.png?width=786&format=png&auto=webp&s=764b15d0695792766367cc05b5adae78f3af840a
Here we can see the return improve from the standard 8% all the way to 11.8% if using 50% LVR. But in my opinion, 50% LVR is too risky for many investors appetite here, even if it is my ideal point. Instead, i would direct your attention to 35% LVR.
Why 35% LVR?
a 35% LVR comes with a number of benefits to an investor doing standard VAS/VGS/VDHG style etf investing.
  1. Increased returns - as we can see it takes an 8% return and increases it to a 10.1% return
  2. Returns slightly understated - The return is not factoring the effect that the interest will have on your tax return - it is tax deductible.
  3. Low chance of a margin call.
Let's talk about #3. Margin calls are without a doubt the scariest part of margin lending, and i don't blame you for being afraid of them. Many people who leverage too aggressively and fly too close to the sun get hit with a nasty cycle where:
  1. Their investment falls into margin call territory because it has dropped
  2. They are forced to sell their assets at the worst points in the market to get out of the margin call
  3. they miss out on the recovery because their excess cash was used covering margin calls on the way down.
But this is where a 35% LVR is so appealing. the calculation to figure out where your margin call will happen is:
1-(Loan/(Lending Value + Buffer)).
So if we take a standard favourite of Ausfinance such as VAS, VDHG etc, we can see that they have a LVR of 75%. Industry standard buffer is 10%. so let's figure out a margin call on a $25,000 investment, with $14,000 borrowed funds (35% LVR):
1-($14,000/(($39,000*0.75)+($39,000*0.10))) = 58%
it would take a 58% drop in the portfolio to bring it to a margin call. This is the portfolio dropping from $39,000 to $16,470.
This requires a staggering drop before you experience a margin call, and if you are concerned reducing your LVR to only 25% will still improve your return and increase your chance of never being margin called.
You have time to add to your holdings with equity only (buying a dip + decreasing your overall LVR). the important thing is you can manage your risk and it requires truly a cataclysmic level of decline before you experience a margin call ,and at that point that may not be your biggest concern.

Why all the fuss? What's the point of risking being margin called?
It's all in that % return. in the following example i will use ASIC's compound calculator, along with the following parameters:
$25,000 initial deposit (your capital), $0 regular deposits, annual compounding, and a 30 year time horizon. The only assumption is that as the portfolio grows in capital value, the 35% LVR is maintained.
Case 1 - 0 LVR (AKA compounding@8%) - after 30 years of compounding at 8% you end up on $251,566
Case 2 - 35% LVR (AKA compounding at 10.1%) - after 30 years of compounding at 10.1% you end up on $448,291
Verdict - Case 2 ends up being $196,725 better. a 78% superior return
Every % matters so much in a long term strategy, it is truly impossible to overstate how important it is to long term outcomes.

Case Study: Super Showdown
As a final demonstration of the power of a low leverage strategy we will put two different cases head to head. Let us assume that a 30 year old intends to retire at age 65, and has the option of either having $50,000 in super, or invested at a 35% LVR.
After retirement, they will either 1. Take the money tax free in pension phase or 2. pay capital gains tax by cashing out their own 'pension' each year, with their marginal tax rate being 30% (using the currently legislated but not implemented rates). Case 2 will overstate their tax slightly, as i will not scale it, i will just hit the whole thing at 30%.

https://preview.redd.it/86c7xcrc7lb51.png?width=530&format=png&auto=webp&s=045a1774106ac8d8ac848decb04bec9a142bdc52
We can see that with the CGT discount, paying 15% tax is actually better than paying a 0% tax rate due to the higher return. It's an out-performance of $508,681
But okay, i hear you, CGT discount may be gotten rid of, let's recalculate it with no discount:

https://preview.redd.it/yafmmg6p7lb51.png?width=530&format=png&auto=webp&s=d9ae4b0db5de48808ca202f7c6e40d599c34c065
Even without a CGT discount (and 30% flat is more tax than you'd pay on a CGT discounted method on the highest marginal rate currently) there has been an out-performance of $306,102

What do i hope you take away from this?
Even if you decide that the risk of margin lending is too much for you, or that i'm absolutely insane to choose an outside of super strategy that relies on borrowing to invest, i hope that i have given you something to think about.
the one thing i hope everyone takes away from this just as a general point is the sheer power of small changes in your long term return %.
I really strongly believe in conservatively leveraging safe and boring investments to boost that all critical return over the long term to create outstanding long term results.
minor edit: fixed up some grammar
submitted by Savings-Flounder to AusFinance [link] [comments]

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Margin Calculator for INDICES (NIKKEI225 & DOW30) NIKKEI225 & DOW30 have fixed leverage 1:50 Dow30 1 LOT=1 Contract Nikkei225 1 LOT=100 Contracts Please consider carefully whether trading or investing in bitcoin or other cryptocurrencies is appropriate to your financial situation. Only risk capital should be used when trading or investing. Margin vs markup. The difference between gross margin and markup is small but important. The former is the ratio of profit to the sale price and the latter is the ratio of profit to the purchase price (Cost of Goods Sold). In layman's terms, profit is also known as either markup or margin when we're dealing with raw numbers, not percentages. Forex trading is extensive and to perform well in this field, a trader needs a set of tools. There are many different tools and calculators available in the market. And in this article, we will have a look at the margin calculator. Required Margin in Trading. Before getting into the exact tool, let’s know about what a margin in trading is. Firstrade offers the lowest margin maintenance requirement in the online trading industry for long stocks: 30%. Choosing a Broker With a Low Margin Maintenance Requirement When trading on margin, Regulation T, known informally as 'Reg T', requires traders to have at least 50% of the purchase price of long positions of stock in their account at Margin trading on the forex market is speculative and carries out a high level of risk including full loss of deposit. Using the trading calculator traders have an opportunity to make online calculations of transaction parameters choose more efficient trading strategies and make best possible decisions before opening positions.

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How To Calculate Margin

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