Your investment portfolio has a margin level that reflects how much exposure your DARWINs hold relative to your capital. In practice it only becomes relevant in very exceptional cases. Here is exactly how it works.
The DARWINs you invest in open trades on underlying assets. Applicable regulation for retail clients limits the maximum exposure an investment portfolio can hold relative to its capital, in order to protect investors from losing more than the capital deposited. Your margin level is the figure we use to monitor this, and it is calculated in real time.
It is extremely unlikely this is going to affect your investing account. A DARWIN's risk is calibrated to a 6.5% monthly VaR(95%) , a risk profile comparable to unleveraged exposure to an index such as the S&P 500, which adjusts the exposure as a first layer of risk control. For your margin level to come anywhere near the thresholds described further down, three conditions would have to coincide at the same time:
- maximum 3:1 investor leverage, fully used;
- a portfolio concentrated in a very small number of DARWINs; and
- huge losses in those DARWINs simultaneously.
In practice, the vast majority of investment portfolios operate at margin levels many times higher than these thresholds at all times, and is very unlikely to ever approach them. They exist as a regulatory safety net, not as part of everyday investing monitoring.
The rest of this article explains how they work, should you want the detail.
Where does the exposure come from?
The DARWINs in your portfolio open trades on underlying assets (fx, indices, commodities, etc.) . Your investment replicates that exposure proportionally, so at any given moment your portfolio holds an aggregate open exposure across all the underlyings traded by all the DARWINs you are invested in.
Investor leverage multiplies that exposure, if applied. With 3:1 leverage, the same investment produces three times the underlying exposure and therefore consumes three times the margin.
How your margin level is calculated
Two figures are involved:
- Margin consumed. For each underlying asset, the margin retained is the open nominal exposure multiplied by the margin percentage required for that asset. The margin percentage of every asset is published in this table.
- Portfolio equity. Your own capital in the investment account.
Margin level = portfolio equity ÷ total margin consumed by all open underlyings
A portfolio with €1,000 of equity and €500 of margin consumed therefore has a margin level of 200%.
Protection levels
Two additional thresholds apply to your investment portfolio:
| Margin level | What happens |
|---|---|
| Below 100% | No new purchases and no withdrawals from the investment account are allowed. No action can be taken that would push your margin level further below 100%. Normal operation resumes as soon as sales bring it back above 100%. |
| Below 50% | Part of the open exposure is closed automatically by the margin risk engine, in order to restore the margin level. |
These thresholds relate solely to your portfolio's exposure. They are independent of the risk engine that governs each individual DARWIN's own risk profile which makes this scenario extremely unlikely.
Example
Take a portfolio with €5,000 of equity, invested across several DARWINs whose combined open trades produce the aggregate exposure below.
Unleveraged (1:1): €5,000 invested
| Underlying | Open exposure | Margin required | Margin consumed |
|---|---|---|---|
| EURUSD | €10,000 | 3.33% | €333 |
| US Tech 100 (NASDAQ) | €4,000 | 5% | €200 |
| Gold (XAUUSD) | €2,000 | 5% | €100 |
| Total | €16,000 | €633 |
Margin level = 5,000 ÷ 633 = 790%
Leveraged 3:1 = €15,000 invested, equity unchanged at €5,000
The exposure on every underlying is multiplied by three:
| Underlying | Open exposure | Margin required | Margin consumed |
|---|---|---|---|
| EURUSD | €30,000 | 3.33% | €999 |
| US Tech 100 (NASDAQ) | €12,000 | 5% | €600 |
| Gold (XAUUSD) | €6,000 | 5% | €300 |
| Total | €48,000 | €1,899 |
Margin level = 5,000 ÷ 1,899 = 263%
Leverage triples your exposure and therefore divides your margin level by three. Even fully invested at 3:1, this portfolio sits well above the 100% threshold: margin consumed would have to grow from €1,899 to €5,000, or equity fall to €1,899, before the first threshold is reached.
Where to check your margin level
Your current margin level is calculated in real time and displayed at the top of your investment account:
What to do if your margin level approaches 100%
- Redistribute your investment across more DARWINs. The more diversified your portfolio, the lower the aggregate margin retained tends to be, since exposure is spread across a wider set of underlyings, and positions taken in opposite directions on the same underlying partially offset each other.
- Sell part of the amount invested in the DARWINs in your portfolio. This reduces your open exposure and therefore increases your margin level.
- As a last resort, deposit additional capital into your investment account and leave it uninvested. Increasing your equity without increasing your exposure raises your margin level.
An additional protection: the 90% stop-out
Separately from your portfolio's margin level, every individual investment is protected by a stop-out: if losses on an investment in a DARWIN reach 90% of the real (not leveraged) invested amount, Darwinex closes that investment immediately.
This protection operates at individual investment level, is unrelated to the margin calculation described above, and applies whether or not your portfolio is leveraged. See Leveraged DARWIN portfolios for a worked example.