Account liquidation

At what point is your account cut off? Is it when equity reaches 0? So as soon as equity hits 0 all positions are closed?

If I understand you correctly, you mean to ask at what point your broker will close your trades for you???

This depends on what leverage you are trading....Your broker will make a margin call when you no longer have the necessary margin to cover your trades.

At 1:100 leverage on a standard account (100k) you need $1000 per contract in your account to maintain the trade. At 1:50 you will need $2000 per contract.

Most brokers will have a column on the platform which reads how much margin you have left..When this reaches zero....margin call!!

Hmm Im pretty sure i now know where the source of my confusion lies... and thats in the fact that I dont understand what margin is. Ive looked at how its calculated I just dont understand what it is still... im sure its something really simple but i just cant seem to get my head around it. So once someone explains it to me im sure ill understand when an account is closed. By closing an account I mean the situation whereby your broker automatically closes it once it reaches a critical point, so you understood me correctly.

ok, margin is the amount of $$$ that your broker requires to maintain a trade.

The amount of margin required by the broker is determined by the leverage. Some brokers offer 400:1 some 100:1 or less...

If your leverage is 100:1 you will need $1,000 per standard contract ($100k)

If your leverage is 50:1 you will need $2,000 per standard contract, and so on..

If you have $50,000 in your trading account and you have 1 standard contract open, with 100:1 leverage, most brokers (policy varies I believe) will give a margin call (trades will be closed) when your equity hits $1,000.

Therefore $50,000 - $1,000 margin = $49,000

Hope I explained this properly

Unfortunately, you didn't. Margin varies by currency pair.

So essentially depending on broker policy... they will liquidate all your trades and close your account as soon as your equity goes to 0 or near it... so margin is essentially equity? i.e. assuming you enter that trade of 1 lot @ 1:100 leverage with a $50,000 account meaning that straight after opening that trade you will have a free margin of $49,000 while your equity/margin will be $50,000 And it varies by currency pair because each point is worth a different amount for each pair?

Hmm so whats the difference between margin and free margin? Like obviously free margin is the amount of money that you have left in your account which you can use to open additional trades... in the case of the $50,000 u can open 50 trades... but if you do that as soon as the price goes 1 pip against you your pretty much screwed and your account will be closed?

Hmm still kinda confused I think...

Margin is still your money. It represents your good faith deposit on the money you've borrowed. Once the trade is closed, you get that money back. It will make a nice parting gift once you've blown your account.

Normally quoted as 100:1 but we know what you meant. It varies by pair because margin has to be converted to a single currency. Some brokers let you choose. If your account was USD based the USDCAD would require $1000 USD but the GBPUSD (trading at 2x the USD) would require a margin of $2000 USD.

Brokers that I have traded with still only require a margin of $1000 on the GBP/USD with 100:1 leverage.

What broker are you with Atomic? Some brokers like FXCM have it all spelt out on the platform...You could open a demo with them and it might help you..

Your broker will margin call before your equity reaches zero...Margin call will occur when your equity goes down to your used margin amount. If you had 1 contract open (100k) then margin call would occur when your equity reached $1000..

Hope this helps

Im paper trading at the moment using Interbank FX trader 4... I have an account open and have been monitoring the margin levels. I am writing an EA and I need to know this info in order to program the optimal amount of trades that I should have open/open. I think I get it now though... thanks guys.

ok no worries, good luck with the EA..

Just to reiterate... opening a 1 lot 100:1 trade on a $1000 dollar account wouldnt be a good idea? (and not just because of the fact that thats just too great a risk anyway)

If you mean 1 standard contract ($100,000 USD) you couldn't do it even if you wanted to beceause you would have no account left after margin.

By the way, Norman is right about FXCM but that is not typical of all brokers. You need to find out what your broker charges specifically.

Yep as I thought... once again thanks.

Hmm this whole margin call issue has got me wondering about the credibility of all those EA's posting huge profits and nice exponential looking equity curves... very sus great strategies aside!

Also another question regarding these margin calls, lets say that we have a 100:1 leveraged account with $50,000 as we have been using as examples up to now... and now we open 1 standard trade of 1 lot so that means as we have concluded that we need at least $1000 of equity left in the account to prevent any problems. But now lets say that we open 2 trades... I'm guessing that now we need at least $2000 of equity. What I'm asking is... the amount of equity in the account must equal or be greater than the TOTAL margin used and not just be greater than or equal to the greatest margin used... so if we buy 1 lot and 0.5 lots then we would need $1500 of equity and not just $1000? So in other words in order to be safe we need to add up all the currently open trades and assume that they all stop out at their stop loss levels and on top of that add the new proposed trade and if this total amount presents an equity figure that is greater than the margin used the we can safely open a new trade without any fear of margin calls... correct?

never mind I fully understand it all now... all good disregard the final question