What happens if you open a trading account with just $100?

Or €100? Or £100?

Since margin trading allows you to open trades with just a small amount of money, it’s certainly possible to start trading forex with a $100 deposit.

Let’s see what can happen if you do.

In this trading scenario, your retail forex broker has a Margin Call Level of 100% and a Stop Out Level of 20%.

Now that we know what the Margin Call and Stop Out Levels are, let’s find out if trading with $100 is doable.

If you have not read our lessons on Margin Call and Stop Out Levels, hit pause on this lesson and start here first!

Step 1: Deposit Funds into Trading Account

Since you’re a big baller shot caller, you deposit $100 into your trading account.

You now have an account balance of $100.

Step 2: Calculate Required Margin

You want to go short EUR/USD at 1.20000 and want to open 5 micro lots (1,000 units x 5) position. The Margin Requirement is 1%.

How much margin (“Required Margin“) will you need to open the position?

Since our trading account is denominated in USD, we need to convert the value of the EUR to USD to determine the Notional Value of the trade.

€1 = $1.20

€1,000 x 5 micro lots = €5,000 

€5,000 = $6,000

The Notional Value is $6,000.

Now we can calculate the Required Margin:

Required Margin = Notional Value x Margin Requirement

$60 = $6,000 x .01

Assuming your trading account is denominated in USD since the Margin Requirement is 1%, the Required Margin will be $60.

Step 3: Calculate Used Margin

Aside from the trade we just entered, there aren’t any other trades open.

Since we just have a SINGLE position open, the Used Margin will be the same as Required Margin.

Step 4: Calculate Equity

Let’s assume that the price has moved slightly in your favor and your position is now trading at breakeven.

This means that your Floating P/L is $0.

Let’s calculate your Equity:

Equity = Balance + Floating Profits (or Losses)

$100 = $100 + $0

The Equity in your account is now $100.

Step 5: Calculate Free Margin

Now that we know the Equity, we can now calculate the Free Margin:

Free Margin = Equity - Used Margin

$40 = $100 - $60

The Free Margin is $40.

Step 6: Calculate Margin Level

Now that we know the Equity, we can now calculate the Margin Level:

Margin Level = (Equity / Used Margin) x 100%

167% = ($100 / 60) x 100%

The Margin Level is 167%.