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Thread: Margin and Leverage

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    Default Margin and Leverage

    Hi all,


    I would just like to have someone confirm my understanding of leverage & Margin & Margin call and before anyone suggests, i have been through baby pips a few time now, but feel like I'm still missing something.

    I did search using various margin & leverage & margin call, but nothing hit exactly what i was looking for. I apologise for my noobishness.. haha, but we have to start somewhere

    okay for my example to keep the numbers easy(for my benifit ofc):
    - Mini lot
    - 100:1
    - xxx(one of the majors)/usd for a pip value of $1
    - Account balance $10k
    - 1% risk

    That said:
    Account balance - margin req = usable margin
    $10000.00 - $100.00 = $9,900.00

    What I'm trying to figure out is where a margin call would be done,
    usable margin / pip value = # pips drop to MC
    $9,900.00 / $1.00 = (9,900 pips - spread pips)

    That seems like an awful lot of pips to drop before you would get margin called. Is there an error in my thinking / understanding??

    Thanks again

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    Quote Originally Posted by temo876 View Post
    Hi all,


    I would just like to have someone confirm my understanding of leverage & Margin & Margin call and before anyone suggests, i have been through baby pips a few time now, but feel like I'm still missing something.

    I did search using various margin & leverage & margin call, but nothing hit exactly what i was looking for. I apologise for my noobishness.. haha, but we have to start somewhere

    okay for my example to keep the numbers easy(for my benifit ofc):
    - Mini lot
    - 100:1
    - xxx(one of the majors)/usd for a pip value of $1
    - Account balance $10k
    - 1% risk

    That said:
    Account balance - margin req = usable margin
    $10000.00 - $100.00 = $9,900.00

    What I'm trying to figure out is where a margin call would be done,
    usable margin / pip value = # pips drop to MC
    $9,900.00 / $1.00 = (9,900 pips - spread pips)

    That seems like an awful lot of pips to drop before you would get margin called. Is there an error in my thinking / understanding??

    Thanks again
    if your margin become minus, and less than 100%, it's the time for margin call.
    your margin's not enough to handle your trading....if it goes to 70% your trading will be closed automatically.
    your risk and money management seem good to me...
    good luck

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    Default

    Quote Originally Posted by temo876 View Post
    Hi all,


    I would just like to have someone confirm my understanding of leverage & Margin & Margin call and before anyone suggests, i have been through baby pips a few time now, but feel like I'm still missing something.

    I did search using various margin & leverage & margin call, but nothing hit exactly what i was looking for. I apologise for my noobishness.. haha, but we have to start somewhere

    okay for my example to keep the numbers easy(for my benifit ofc):
    - Mini lot
    - 100:1
    - xxx(one of the majors)/usd for a pip value of $1
    - Account balance $10k
    - 1% risk

    That said:
    Account balance - margin req = usable margin
    $10000.00 - $100.00 = $9,900.00

    What I'm trying to figure out is where a margin call would be done,
    usable margin / pip value = # pips drop to MC
    $9,900.00 / $1.00 = (9,900 pips - spread pips)

    That seems like an awful lot of pips to drop before you would get margin called. Is there an error in my thinking / understanding??

    Thanks again

    your thinking is correct. that's really a lot of pips.
    that is because your position is only 1% of your total account balance.
    however there are 2 types of broker.
    those that even include the used margin in computing margin call and
    those that only use the usable margin.
    if a margin call is made (usually when your account balance becomes
    zero), all open position will be automatically closed.
    in the case of fxopen (mt4), margin call is executed when your net
    equity becomes zero. fxopen uses all account balance to compute
    margin call.
    net equity = account balance - current profit (loss).
    your open position will be closed (margin call), because there's no
    more account balance to cover for the accumulated losses.

    note that if you have open positions, when you close them, your
    account balance will be updated to the accumulated proift/loss.
    ------

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    Quote Originally Posted by qlinks View Post

    your thinking is correct. that's really a lot of pips.
    that is because your position is only 1% of your total account balance.
    however there are 2 types of broker.
    those that even include the used margin in computing margin call and
    those that only use the usable margin.
    if a margin call is made (usually when your account balance becomes
    zero), all open position will be automatically closed.
    in the case of fxopen (mt4), margin call is executed when your net
    equity becomes zero. fxopen uses all account balance to compute
    margin call.

    net equity = account balance - current profit (loss).
    your open position will be closed (margin call), because there's no
    more account balance to cover for the accumulated losses.

    note that if you have open positions, when you close them, your
    account balance will be updated to the accumulated proift/loss.
    ------
    read this

    17) Can I get Margin call if I will have no free margin?
    No. You will not get any margin call even if your free margin will be in the minus. Positions will stay opened until available equity will be not less than 10% from required margin.

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    Quote Originally Posted by nonamer View Post
    read this

    17) Can I get Margin call if I will have no free margin?
    No. You will not get any margin call even if your free margin will be in the minus. Positions will stay opened until available equity will be not less than 10% from required margin.
    so this is actually the formal rule for margin call.
    so from where can this reference be found?
    i also would like to know.

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    Quote Originally Posted by qlinks View Post
    so this is actually the formal rule for margin call.
    so from where can this reference be found?
    i also would like to know.

    u can find at u agreement
    https://fxopen.com/Download/customer_agreement.pdf
    or FAQ fxopen

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    Quote Originally Posted by nonamer View Post
    u can find at u agreement
    https://fxopen.com/Download/customer_agreement.pdf
    or FAQ fxopen

    the customer agreement says 20% of equity (clause 7.6) while
    the faq says 10% of equity (#17). am i right?
    which is right? which is more current?
    *

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    The Company is entitled to close Customer’s open positions without his/her/its consent or any prior written notice if the equity is less than 20% of the necessary margin.
    ------------------------------------------------------------
    You will not get any margin call even if your free margin will be in the minus. Positions will stay opened until available equilty will be not less than 10% from required margin.

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