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1. Determine the total transaction (notional) value. Let's say you wish to trade one 'lot.' A lot is 100,000 units in any currency. For instance, the quote 100,000 EUR (euro) / USD (U.S. dollar) is equivalent to 100,000 euros.
2. Determine the margin requirement. This is the amount of money you are required to put up in order to make a trade, and is referred to as 'margin requirement' by the forex broker. Let's say your broker requires 1 percent of the transaction amount before you can trade.
3. Determine the Forex margin. Multiply the margin requirement by the transaction value. The calculation is 100,000 x 0.01 = $1,000.
4. Calculate margin-based leverage. Divide total value of the transaction (notional) by the forex margin. The calculation is: 100,000 / 1,000 = 100:1 or 100 to 1.