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Notional value

By Jarosław Wasiński • Published: • Updated:
The face value of the exposure represented by a position, expressed in a specified currency. Notional value is distinct from the margin posted and from the amount that might be lost.
Example. Assume one FX lot is EUR 100,000. A 0.20-lot EUR/USD position represents EUR 20,000. At EUR/USD = 1.1000, its USD notional is USD 22,000. With an illustrative 5% margin rate, the initial USD margin is USD 1,100.

Name the currency

For this linear FX example, base-currency units = lots × contract size. Converting those units at the pair price gives quote-currency notional. Reporting in a third account currency needs an additional conversion.

Common mistake

A USD 1,100 margin requirement does not make a USD 22,000 exposure a USD 1,100 position. A small percentage price move acts on the exposure, while margin is collateral. Other contracts may use different multipliers.

Apply it

Record notional, equity and planned loss separately. When comparing multiple positions, first convert them to a common reporting currency; netting totals can conceal large offsetting exposures.

FAQ

Is notional the money I deposited?

No. It describes exposure in a named currency. Deposited cash, equity, collateral and planned loss are separate amounts.

Should offsetting positions be reported only net?

A net number can be useful, but gross quantities, currency components, costs and collateral can remain relevant. State the aggregation method.

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Put this term into practice

Use your broker’s contract specifications and current exchange rates. Calculators illustrate assumptions; they do not guarantee execution prices or returns.

Jarosław Wasiński

Editor-in-chief, ForexMechanics.com • Macro & FX analyst

Independent analyst and practitioner with over 20 years of experience in financial markets. Actively involved in Forex since 2007, with a focus on fundamental analysis, OTC market structure, and disciplined capital risk management.

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All content is educational and informational only – it does not constitute investment advice or a recommendation. Remember: leveraged trading (Forex/CFD) carries a high risk of rapid capital loss.