What is notional value
Notional value is the full market value of the asset a position controls. It is not the amount of money you put up to open the position.
With leverage, you pay only a margin deposit, but your profit or loss follows the notional value. That is why notional value is the real measure of your exposure.
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How to calculate it
For forex and CFDs the general formula is:
Notional value = lots × contract size × current price
The result is in the quote currency of the instrument. To compare it with your balance, convert it into your account currency.
Margin is linked to notional value:
Margin = notional value ÷ leverage
Worked example (hypothetical)
Suppose you open a position in XAUUSD (gold against the US dollar):
- Find the contract size per lot in the instrument specification in your platform. For gold it is a set number of troy ounces.
- Multiply your lot size by that contract size. This gives the total ounces you control.
- Multiply the total ounces by the current gold price in USD. The result is the notional value in dollars.
- Divide by your leverage. The result is the margin the position needs.
At high leverage the margin is a small part of the notional value. A price move of a given percentage changes your equity by that percentage of the notional value, not of the margin. That is how leveraged CFD and forex positions can lose money fast. To get the figures for a real position, use the tools on the calculators page.
Nominal value vs notional value
The two terms are often mixed up:
| Term | Meaning | Typical use |
|---|---|---|
| Nominal value | The stated value printed on a security, which does not change with the market | Bonds, shares (face value) |
| Notional value | Underlying quantity × current market price, which changes as the price moves | Futures, options, swaps, CFDs, forex |
A bond's nominal value stays fixed. The notional value of a CFD position rises and falls with every tick.
Where you see the term
- Trading platforms. MetaTrader 4 and MetaTrader 5 show contract size and margin, not always notional value. You work it out from the specification.
- Broker reports and statements. Volume is sometimes reported as notional turnover.
- Market news. Derivatives markets are often described by total notional outstanding. This figure is much larger than the money actually at risk.
- Regulation. Leverage limits and position limits are often defined against notional value.
Precise definition and edge cases
- Options. Notional value is underlying quantity × contract multiplier × underlying price. It is not the premium paid. Risk-adjusted exposure uses delta.
- Interest rate swaps. The notional principal is only a reference for calculating payments. It is usually never exchanged.
- Forex pairs. Notional value is in the base currency at the time of opening, and in the quote currency at market price. It moves even when your lot size stays the same.
- Gross vs net. Gross notional adds up all positions. Net notional offsets longs against shorts. Hedged books can show large gross figures and small net figures.
Related terms
Contract size, exposure, derivatives, collateral, forward contract, currency risk, risk management, trading glossary.
Frequent questions
What is the notional value meaning in simple words?
It is the total value of what your position controls, not the money you deposited to open it.
Is notional value the same as margin?
No. Margin is a deposit equal to notional value divided by leverage.
Why does notional value matter for risk?
Profit and loss follow the notional value. A small price move can produce a loss that is large compared with the margin.
Does notional value change after I open a trade?
Yes. It changes with the market price, even if your lot size stays the same.