The formula that is used for Forex Leverage Calculator looks like this:

((Lot * Contract Size) / Margin) * Trade Open Price * Margin Rate = Required Leverage

With the use of this formula, you can easily determine the amount of capital needed to enter the trade.

Alternatively, here is a short formula to determine the proportion of leverage in the 1:X (1:50, 1:100 and etc.) expression.

Trade Size / Customers Funds = Leverage

Where:

Trade Size – total size of the transaction in monetary expression.

Customer Funds – traders own capital in monetary expression.

Assume a trader is willing to make a purchase of Euros worth 100 000 USD, but the trader’s own capital available is only 2 000$ so far.

100 000$/2 000$ = 50 that means that per unit of own funds, the trader needs to borrow additional 50 units of funds. In such a case your required leverage is 1:50. If your trader account provides you with only 1:20 leverage it means that you may not enter the trade or you need to increase your leverage by switching to a higher level account or by negotiating with a forex broker.

Alternatively, transaction volume is 20 000$, you may enter the trade because 20 000$/2 000$ = 10. In such a case, a trader needs additional 10 units of funds per 1 unit owned. In such a case, one with available leverage of 1:20 may enter the leveraged trade with the broker’s financial support.