question about margin?

I.ve tryed to understand the concept of margin but can't get it. Lets say i OPEN AN ACCOUNT WITH 500 $ and I'm taking a trade with 2 dollars a pip. So If I lose 250 pips they will close My position automaticly or will they close it before I reach the bottom of 500$? Well I d'ont know!

Need help!!

Thanks

They will probably close it before you get that situation. An open position requires margin. This is like collateral. If your leverage is 100:1. Your margin requirement will be a 100th of the position side. For example on a 10k position, the margin requirement will be $100.

hope this helps

Yes they will most certainly close your position before then. Every trade requires a "margin security" that will be taken when you initiate a trade. It'll be given back when you close the trade, so don't worry there. If you drop below the required security level you will get a margin call.

Go here:
http://www.forexfactory.com/showthread.php?t=6948

Great thread to read, it's where I got my first dose of money management forex-style.

Do NOT trade $2 per pip w/ a $500 account. It's a disproportional risk level, you'll end up blowing your account.

Lets say you're willing to risk 2% of your account. In a $500 account that's $10 per trade. Now if you set a 30 pip stop loss, that's 33 cents per pip, or 3 micro lots per trade (.3 mini lots).

Hi Bridge,

Please read the thread that Mr.Rabid provide.It's a good thread.A good question indeed considering that most of the local trader dont pay so much attention on this topic or in the leverage topic.The key:u need to be able to enter the market...to do so..dont blow ur account..or put a very small lot till the time u comfort with ur trading live.Forget about the profit first at this stage..all u need to do is to create a zone for ur comfortable trade.

ok thank very much but let's say I Have 10 000$ in my bank account that I allow myself to risk in the forex market can I still open an account with 500$ and take trade at 2$ pip. Because 3% of 10 000 is 300 on each trade so depending on my stoploss I could easyly reach my 2$ pip. but My point is that I don't want to put 10 000 in broker account because I d'ont trust them, never made bussines with them so I'm careful in the start. So what I must be aware is that if I place a trade at 2$ pip means that I have a 20 000$ position and my margin called will happen if my account goes down at 200$ with a 1;100 leverage wich is 20 000/100=200 with 1;50 leverage they will close it at 400$ in my account? is it right?

Well yes, if you had 10k in your bank account to risk and are willing to re-fund your account a few times. Keep in mind that if you're trading with a $300 possible loss on each trade, you'll need to refund after each failed trade.

If you take 2 mini lots for $20,000 and a 100:1 leverage then your margin security will be $200. This will reduce your "free margin" to $300. If you don't have any other trades going you can then afford to lose $300 before a margin call. At that point you'd drop below the required margin security and your positions would be closed. Once your positions are closed your equity would be recalculated and unless there was a technical glitch, you'd have $200 (well, $199.99) left in your account after the call.

At 50:1, the required margin security is $400 yes. At 200:1, $100.

That's the real value of higher margin levels, it lets you keep more active trades open.

thank you very appreciated!!