Oil Leverage and Margin

Leverage on oil contracts 

FOREX.com's leverage for Brent Crude (UK Oil) and West Texas Intermediate (US Oil) oil contracts is set at 100:1. This means that for every $1 you have in your account balance, you have $100 in buying and selling power for oil trading. Keep in mind that leverage increases risk over full value trading.

How margin for oil trading works 

Margin is the amount of money you must have in your account to open and maintain a position. At 100:1 leverage, your margin factor is 0.01 (1%). This means that you are required to have a minimum cash balance of 1% of the total value of the oil positions you hold in your account at any one time.

At FOREX.com your risk is limited to the funds you have on deposit with us. There are no margin calls, so if your account balance falls below the margin requirement we will automatically close your positions to ensure that you cannot lose more money than you have in your account.

As an example:

The current West Texas Intermediate price is quoted as US Oil $51.55

You buy 1 lot (100 bbls) at $51.55.

Your margin requirement is 1% of your trade size, and is calculated as follows:

Trade size x price x margin factor (percentage)

100 (bbls) x $51.55 x 0.01 = $51.55 

Calculating Profit and Loss 

Profit and loss calculations for trading oil are fairly simple.

The smallest increment of an oil price is 0.01. The smallest trade you can place is a single lot, or 100 barrels (bbls). At this level, each pip is worth $1.00.

A change in price from 52.55 to 52.85 means a difference of 0.30, or 30 pips. If you are trading 1 lot, and each pip is worth $1, then the profit or loss from this price movement would be $30.00.

If you trade more than one lot, the value of each pip is simply multiplied by the number of lots you are trading. Rather than each pip being worth $1.00, if you are trading 5 lots then each pip is now worth $5.