WAL= 1÷[(T1×T1M) + (Tier 2×T2M) + (Tier 3×T3M) + (Tier 4×T4M) + (Tier 5×T5M)]÷∑(T1, Tier 2, T3, T4, T5)
Where:
WAL = Weighted Average Leverage
NV= Notional Value (USD)
T1…5= Tiers’ Notional Value (USD)
T1M…T5M= Tiers’ Margin% /100
Margin Requirements Formula (MR)
MR=∑(T1, T2, T3, T4, T5)÷WAL×USD to Account Currency Rate
Margin Requirements Example
Assume you open a Position #1 Buy 1 lot BTCUSD at a price of 10,000 for a BTC Denominated account, with account default Leverage of 1:500.
Notional value (USD) = [(0 * 50%) +(1-0)] * 1 * 10,000 = 10,000 USD
WAL = 1 / [(10,000 * 0.002)] / 10,000 = 500 Leverage
In this case, the aggregate notional USD value of open positions on BTCUSD is less than 10,000 USD, which falls under Tier 1, therefore, a leverage of 1:500 is provided for the first 10,000 USD.
Margin Requirements = 10,000 / 500 * 0.0001 = 0.002 BTC
You open an additional position # 2 Buy 4 lots BTCUSD at price 10,000.
New Notional value (USD) = [(0 * 50%) + (5+0)] * 1 * 10,000 = 50,000 USD.
New WAL = 1 / [(10,000 * 0.002) +(40,000 * 0.005)] / 50,000 = 227.27 New Leverage
In this case, the aggregate notional USD value of open positions on BTCUSD is greater than 10,000 USD, but less or equal to 50,000 USD, which falls within Tiers 1 and 2, therefore, a leverage of 1:500 is provided for the first 10,000 USD, and a leverage of 1:200 for the remaining 40,000 USD.
New Margin Requirements = 50,000 / 227.27 * 0.0001 = 0.022 BTC