marginal call

when is marginal call said to happen on a trade that is open.
I might need to make some descition that will affect my trading. can some one tell me?

Hi Phillips, lets supose a trader has an account with $1,000 and 1:200 leverage, then, he opens a position of 1 standard lot ($10 per pip) of EUR/USD, (with 1:200 leverage, opening a standar lot of 100,000 units, the trader would be using $500 of his margin as a requirement to have the open position... $500 bucks X 200 leverage = 100,000 units; so the margin available is only $500 bucks) ok?

Then, the trade starts going bad and the trader is losing 50 pips... 50 pips x $10 bucks pip value = $500 floating loss, at that moment, the platorm gives a margin call, and the position is automaticly closed at the price available, resulting in a loss. The trader now has an account with $500 .

This is a raw example, it's neccesary to consider that depending of the broker, the margin call will be given when you have less than 1%, 2% or %5 positive balance available. This scenario can also happen with multiple positions, if there are many small positions, and combined, they result in a floating loss of more than the required available margin, all of them will be closed with the resulting loss, no matter if some positions were winers and other losers, all are closed.

Hope this helps, if is not clear, open your demo, place a lot of positions until you see you margin available is almost $0, and wait...

EDIT: You might want look at this also: http://www.babypips.com/school/impre...rex_lingo.html
here says that depending broker, maybe not all the positions are liquidated, I didn't know , study all the lessons if you haven't done yet.

This depends on ones broker... you need to check with them about your margin call.

I am sorry but i just wanna ask, is it always $10 per pip or it depends on you and the broker?

Thanks!

The value of the pip doesn't change depending broker, change depending the pair of currencies and the size of the lot. For most majors, the value of a pip in a standard lot (100,000 units) is $10, mini lot (10,000 units) $1, and micro lot (1,000) $0.10 .

As WHTenn pointed out, the margin available required, and the margin call procedure policies change from broker to broker, I know one where you don't need any margin available, you can be blowing your account having an open position, until the value of the loss is equal the value of the margin used to open that position; so, better research directly with the broker.

Any currency pair that has USD as the counter will be $10/pip. The value of a pip is calculated by taking the smallest tradable unit (0.0001 for most pairs, 0.01 for pairs ending in JPY) and dividing it by the current exchange rate. If the base currency is not in USD then it must be converted into USD by using the exchange rate. Here are 2 examples:

EURUSD trading at 1.2963. The smallest tradable unit is 0.0001 so 0.0001/1.2963 = 0.0000771. To convert this to a standard contract multiply by 100,000 to get 7.71 Euros. Now, we must convert back to USD by multiplying by the EURUSD exchange rate. 7.71 EUR x 1.2963 = 10.00 USD. As stated previously, any currency pair that has USD as its counter is $10/pip.

The second example is a little more interesting. Let’s calculate the value of a pip for the GBPJPY trading at 237.29. Remember, the smallest tradable increment for a JPY counter is 0.01 so 0.01/237.29 = 0.0000421. Multiplying by 100,000 will return the pip value to a standard contract and yields the value of 4.21 GBP. To get the answer in USD simply multiply by the GBPUSD exchange rate of 1.9468 to get $8.2/pip. As a general rule, most major pairs with a counter currency not ending in USD are worth approximately $8/pip.

okay!

Thank you for the insights.. You guys just cleared it very well..