FX is a product that provides a trader with the ability to control large amounts of capital using very little money; the higher the leverage, the higher the level of risk. At Saxo Capital Markets leverage can be as high as 20:1.
With leverage of 20:1 it is possible to open a position worth EUR 20,000 by using as little as EUR 1,000 of margin up front, and borrowing the remaining amount (EUR 19,000). Please note that the use of leverage requires extra caution, because whilst you can realise large gains if the price moves in your favour, you also runs the risk of damaging losses if the exchange rate moves against you. If in the above example the price moves just 5% against you, the notional value of the position will have decreased from EUR 20,000 to EUR 19,000, a loss of EUR 1,000. This equates to all of the capital invested up front in order to open the position, and represents a 100% loss.
Margin requirements differ by currency pair and may be subject to change according to the underlying liquidity and volatility of the currency pair. For this reason the most liquid currency pairs (the majors) in most cases require a lower margin requirement.
Saxo Capital Markets offer tiered margin methodology as a mechanism to manage political and economic events that may lead to the market becoming volatile and changing rapidly.
For further explanation of the above methodology please click here.
A complete list of margin requirements by currency pair can be viewed under Margin & Trading Requirements as well as in the SaxoTrader platforms, under Trading Conditions.
Margin requirements may be changed without prior notice. Saxo Capital Markets reserves the right to increase margin requirements for large position sizes, including client portfolios considered to be of high risk.
You must maintain the required margin collateral as listed in the Account Summary on the trading platforms at all times.
If at any time while an FX position is open, and the margin required to maintain that position exceeds the funds available for margin trading on the account, you are in breach of your contract and need to meet the margin requirements again. This can be done by either:
- reducing the size of the open margin positions and / or
- providing more funds (margin collateral) to the trading account
When the required margin exceeds your margin collateral you are at risk of a stop-out where Saxo Capital Markets may close your margin positions on your behalf.
Trading risks are magnified by leverage – losses can exceed your deposits. Trade only after you have acknowledged and accepted the risks. You should carefully consider whether trading in leveraged products is appropriate for you based on your financial circumstances.
Forex is categorised as a red product as it is considered an investment product with a high complexity and a high risk.
Saxo Capital Markets is required to categorise investment products offered to retail clients depending on the product’s complexity and risk as: green, yellow or red. Please refer to our "Product Risk Categorisation".