Hello.
I am trying to figure out, before a trade is placed, how much margin I will use up as the trade runs to its stop. I.e., I'd like to figure out how much margin will be used so that I can stay above the brokers 50% margin requirement at all times.
Is it as simple as figuring out how much a trade will lose in your account(positionSize *stopSize), and assuming a 1:1 correlation between used margin, and how much the stop loss costs you?
E.g. below of various variables. Account is in USD, assume pairs with Usd as quote pair(Aud/Usd, Eur/Usd). The below is just an example for simple math.
*Pair: Long Eur/Usd
*Account Balance: $1,000.00
*Margin/Leverage: 2% or 50:1
*Stop Size: 0.0030
*Units traded: 10,000 units
Is the idea to take the cost of the unrealized: StopSize *UnitsTraded =0.0030*10,000 = $30.00
Then multiply the unrealized by the leverage to get the leveraged dollar value of the stop = $30.00*50 = 1500.00
So your account value would be: Account Balance * leverage = $1,000.00 * 50 = $50,000.00
SO the total margin used as this trade approaches the stop would be: leverage Dollar Val of Stop ÷ Accnt Val = 1,500 ÷ 50,000 = 3%
The above is essentially the same as taking the COST of the stop($30) divided by the initial account balance($1000).
However, I am not sure any of this is correct?
I'm not smart, can someone simplify this?
THanks,
FP
I am trying to figure out, before a trade is placed, how much margin I will use up as the trade runs to its stop. I.e., I'd like to figure out how much margin will be used so that I can stay above the brokers 50% margin requirement at all times.
Is it as simple as figuring out how much a trade will lose in your account(positionSize *stopSize), and assuming a 1:1 correlation between used margin, and how much the stop loss costs you?
E.g. below of various variables. Account is in USD, assume pairs with Usd as quote pair(Aud/Usd, Eur/Usd). The below is just an example for simple math.
*Pair: Long Eur/Usd
*Account Balance: $1,000.00
*Margin/Leverage: 2% or 50:1
*Stop Size: 0.0030
*Units traded: 10,000 units
Is the idea to take the cost of the unrealized: StopSize *UnitsTraded =0.0030*10,000 = $30.00
Then multiply the unrealized by the leverage to get the leveraged dollar value of the stop = $30.00*50 = 1500.00
So your account value would be: Account Balance * leverage = $1,000.00 * 50 = $50,000.00
SO the total margin used as this trade approaches the stop would be: leverage Dollar Val of Stop ÷ Accnt Val = 1,500 ÷ 50,000 = 3%
The above is essentially the same as taking the COST of the stop($30) divided by the initial account balance($1000).
However, I am not sure any of this is correct?
I'm not smart, can someone simplify this?
THanks,
FP