Margin calls!?

Hi folks,

Can someone please explain to me Oanda's policy on margin calls:

"An FXTrade account will receive a margin call when the margin required becomes twice the Net Asset Value of the account (or, in other words, if the margin required divided by two becomes larger than the net asset value of the account). A margin call results in an automatic closing of all open positions."

A straight-forward example would really help me out!

Regards, Jim

Just use a proper MM and you'll never experience a MC.

True, but I'd still like to understand it.

Regards, Jim

It might be best to ask your broker to explain it to you. They would know best, and it is part of their job.

When your account equity (current balance minus open trades) gets too low they'll close your open trades so you can't go negative.

When do they do this? When the margin required is greater than or equal to the twice the NAV of your account. In Oanda, in the little panel on the trade window, they show you the current required margin for all of your trades. See that? Take that amount, divide it by 2. If your current equity (current balance minus open trades) goes below that amount, MARGIN CALL!

In other words when your account is worth half, or less, of the margin... kiss your trades goodbye.

A margin call is when they close your trades to cover your losses, then stick out their hand and ask you for more money. Fortunately in FX, being mark-to-market and all that, you rarely end up owing a broker anything. But you'd have to refund the account if you wanted to continue.


Not entirely true unless you also add in loss limits. If you're trading 1% of your equity on each trade, but have a long string of failures, it's statistically possible that you could receive a margin call. That's why part of covering yourself is having an account loss limit, below X% (say 80% of your monthly starting balance) you'll switch back to demo until you can demonstrate profitability (say 50% over monthly start, with a minimum of 30 days tested)... or something to that effect.

Truly one of the best ways I learned about the "margin call" was when I first started trading and keep blowing my demo accounts.

Anyways, I wrote a little article on MM http://braydensgrail.wordpress.com/2...ney-managment/ which I talk a little about "Margin" I dont know if that helps.

Thank you for the helpful replies folks

According to Baby Pips, when Net Asset Value (or Equity) is less than/equal to Used Margin, it's MC time!

Now, that makes sense to me...

But (correct me if I'm wrong), Oanda lets your Net Asset Value drop to half of your Used Margin before they MC you?

So you are liable to lose more with Oanda on a MC? Is that right?

Regards, Jim

Only if your loss is greater than or equal to the margin. Since most ppl use stops and Oanda will be quick to cut your trades, that risk is pretty small.

When I open trades most of the time my margin requirement is greater than my overall risk (because of SL), so even on a margin call I'd still have a positive balance.

Hmm, I think I understand. I just don't really get why Oanda doesn't issue a MC once your Net Asset Value drops to Required Margin? I thought that was the norm among brokers. Why does Oanda let it drop to half your Required Margin and then stop you?

I thought they were big on not letting people lose too much money so they won't stop trading. Their MC policy seems to work in the opposite, they way I see it.

Regards, Jim

Shrug. At some level they're all bucket shops. Oanda, like every other "broker" (non-ECN), makes the most money when the bulk of it's clients lose money.

Aaah.. much better explanation here from Rabid.

Can you please help me out in this thread too?
http://www.forexfactory.com/showthre...84#post2790184

Thank you.

At other brokers it can go as far as 10%-5%, which can leave the account pretty much dry... but in the other hand leaves more room to recover, given the case.

Risking no more than 1% or 2% of the account on each trade (and no more than 10-15% on total trades) makes a MC very improbable to happen, though.

Lol... agree... But It needs ALOT of discipline to apply the money management. Sometimes we are just too greedy to obey our own trading system.

Not true in case of Oanda.

Why not? At least you have something left in your account. My last margin call with a MT4-shop did end that way that I've left 0.40$ in my account. And it was a better MT4-based market maker.

If you want to get a margin call earlier you can just lower your account leverage. It's that easy. But actually I don't see why anyone should left open positions drop that far...

Why is that? Why it's not true for Oanda Case? Sorry, I'm just curious. I know it's killing me sometimes.

It's just the way they do it. Nothing secret. A margin call isn't there to let the client have some money left, it's just there to protect the client from a call for additional cover like you have if you trade futures.

Ah ok ok. I think I get what you mean.

That's one reason why I like to trade Forex, at least the amount money I'm investing is the amount of money that I prepare to risk only.

Thank you for explaining to me Xaron.