What is the relationship between effective leverage and margin maintenance ratio?

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What is the relationship between effective leverage and margin maintenance ratio?

Margin and Leverage

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Published in 2025.03.11

Updated in 2025.04.02

Higher effective leverage increases the required margin and decreases the margin maintenance ratio, raising the risk and the likelihood of a margin call. Conversely, lower leverage reduces the required margin and increases the margin maintenance ratio, lowering the risk and the chance of a margin call.

Additionally, the margin maintenance ratio is affected by unrealized profit and loss. As unrealized profit increases, the margin maintenance ratio rises, improving safety. However, if unrealized losses occur, the margin maintenance ratio decreases, increasing the risk of a margin call.

For information on when margin calls and stop-outs are triggered, please refer to the details below.

When are margin calls and stop-out levels triggered?

The calculation methods for effective leverage and margin maintenance ratio are provided below.

Calculation method of effective leverage

Effective leverage refers to the leverage being used while actively trading (holding a position), and can be calculated using the following formula:

Effective Leverage =
Transaction Amount (Total Position Size) ÷ Effective Margin

Calculation method of margin maintenance ratio

The margin maintenance ratio is an indicator that shows how many times the effective margin is compared to the required margin, and can be calculated using the following formula:

Margin Maintenance Ratio (%) =
Effective Margin ÷ Required Margin × 100

Example of calculating effective leverage and margin maintenance ratio

This is an example of calculating the margin maintenance ratio based on effective leverage. It shows the relationship between the required margin and the margin maintenance ratio for different levels of effective leverage. For example, if the effective margin is 100,000 yen, the margin maintenance ratio for each level of effective leverage is as follows:

Effective Leverage	Required Margin	Margin Maintenance Ratio
2x	20,000 yen	500%
10x	100,000 yen	100%
20x	200,000 yen	50%*1

Effective Leverage	Required Margin	Margin Maintenance Ratio
2x	20,000 yen	500%
10x	100,000 yen	100%
20x	200,000 yen	50%*1

*1On FXON, a margin call occurs when the margin maintenance ratio falls below 50%.

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