DislikedJacko, first I want to say you are helping a lot of people here learn some very good fundamental principles.
I want to apologize for the newbie question but I believe it very much applies to a long term investment strategy such as Jacko's
So to my question: If you have a trailing stop at 50 pips, what happens if the market reopens on a Monday and it is at say 200 or 300 pips below your current position. What happens if your account's margin can not cover the difference? Does the broker just liquidate your acct and your money is gone for good? Or are we suggesting that a long term investor should make sure 300 pips move is less than 2-3% of his acct balance?
Thanks in advance... This is a money management question, but from what I understand that is half the battle.Ignored
this is a good question you ask, and it is obvious that you are aware of the importance of the answer. If and until Jacko answers, please allow me to throw in my two cents.
Jacko has said he risks between 2% & 4% on each trade depending on his personal level of confidence. This percentage is applied to the 50 pip stop, so if the market gapped down 200 to 300 pips over the weekend as you suggest then in theory, the trade would be stopped out with a max loss of 2% to 4%. However, I think the question you are asking is how Jacko's broker would treat Jacko's trade. Only Jacko can answer that, as I do not know who his broker is. With my broker (fxsol) whenever a weekend gaps beyond my stop, they have closed the trade at, or within a pip or two, of the stop (knock on wood they keep doing this).
If this trade did get stopped out by such a large move, Jacko would apply the AH to the stop point (assuming he remains dollar bearish), so it would be picked back up when the market resumed its trend.
Now, assuming Jacko's broker gave him the shaft, and did not honor the stop, would the 200 to 300 pip drop cause Jacko to have a margin call that auto closed his positions? That will depend on how much of his account he is holding in an insured bank account, and how much is kept with the broker for margin purposes. If his whole account is with the broker, then a margin call is highly unlikely. But if only a fraction is with the broker, then a margin call is far more likely. Does this make sense?
If you will forgive me for being so bold, I detect some fuzziness in your understanding of basic money management. Allow me to suggest you read through my money management sticky thread in the Forex Beginner Q&A forum here at FF.
Hope this answered your question (at least as I understood it).
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