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Basic Question about Leverage and Money

  • #1
  • First Post: Jan 23, 2011 10:25am Jan 23, 2011 10:25am
Let's say I have $2250 in my account.

I went short eurusd 1.35 with 1:50 leverage, 0.10 lot.

Now, if eurusd moves to 1.34 (-100 pips), I lose $100.

What if eurusd moves to 1.15 (-2000 pips, -20¢) and is stopped out, I'll lose $2000, isn't that correct? Won't I'll still have $250 left in account under the given scenario?
  • #2
  • Jan 23, 2011 12:55pm Jan 23, 2011 12:55pm
There's something called margin, you need to learn how to calculate it.
  • #3
  • Jan 23, 2011 2:01pm Jan 23, 2011 2:01pm
your margin require is 10000(0.1lot) * 1.35 * 0.02(lv:1/50) = $270

so your useable margin = $1980 and you have 1$/pip therefore you will get a margin call when the market move -1980 pips. you will be left with $270
  • #4
  • Jan 23, 2011 2:05pm Jan 23, 2011 2:05pm
Quoting fr600
Let's say I have $2250 in my account.

I went short eurusd 1.35 with 1:50 leverage, 0.10 lot.

Now, if eurusd moves to 1.34 (-100 pips), I lose $100.

What if eurusd moves to 1.15 (-2000 pips, -20¢) and is stopped out, I'll lose $2000, isn't that correct? Won't I'll still have $250 left in account under the given scenario?
I think you have it a little backwards. If you short (sell) you WANT price to go down. In your example, at 1.3400 you would be +100 pips and at 1.15 you would be up +2000 pips.

Edit: This page might help you some more.
  • #5
  • Jan 23, 2011 2:44pm Jan 23, 2011 2:44pm
Quoting traderjai_inhi
I think you have it a little backwards. If you short (sell) you WANT price to go down. In your example, at 1.3400 you would be +100 pips and at 1.15 you would be up +2000 pips.

Edit: This page might help you some more.
Sorry I meant long. And thanks.


Actually what I meant was:

If I go long at 1.35, having $2250 in my account using 1:50 leverage,

at what rate my account will blow?
  • #6
  • Jan 23, 2011 2:51pm Jan 23, 2011 2:51pm
Quoting fr600
Let's say I have $2250 in my account.

I went short eurusd 1.35 with 1:50 leverage, 0.10 lot.

Now, if eurusd moves to 1.34 (-100 pips), I lose $100.

What if eurusd moves to 1.15 (-2000 pips, -20¢) and is stopped out, I'll lose $2000, isn't that correct? Won't I'll still have $250 left in account under the given scenario?

If you went Long, why would you have a stoploss at 2000 pips ? it would also take approx 2 weeks for it to fall at an ADR of 150 pips. Unless there was a total collapse of the euro overnight.
It never gets easier, you just get better
  • #7
  • Jan 23, 2011 3:09pm Jan 23, 2011 3:09pm
Quoting Shabs19
If you went Long, why would you have a stoploss at 2000 pips ? it would also take approx 2 weeks for it to fall at an ADR of 150 pips. Unless there was a total collapse of the euro overnight.
I have no such plan, I'm only looking to find out when my account blows given I don't close a trade.
  • #8
  • Jan 24, 2011 1:27am Jan 24, 2011 1:27am
Margins confuse me
May the Force be with You
  • #9
  • Jan 24, 2011 2:52am Jan 24, 2011 2:52am
I posted the different calculations for risk, position sizing, margin, leverage, etc here. Hope it helps somebody.
  • #10
  • Jan 24, 2011 11:46am Jan 24, 2011 11:46am
Quoting hanover
I posted the different calculations for risk, position sizing, margin, leverage, etc here. Hope it helps somebody.
Thanks
  • #11
  • Jan 24, 2011 9:12pm Jan 24, 2011 9:12pm
Quoting qazx
your margin require is 10000(0.1lot) * 1.35 * 0.02(lv:1/50) = $270

so your useable margin = $1980 and you have 1$/pip therefore you will get a margin call when the market move -1980 pips. you will be left with $270
Sorry I didn't notice your post for I don't know why. It explains everything I need to know.
  • #12
  • Jan 25, 2011 6:00am Jan 25, 2011 6:00am
its kind of tedious to calculate these stuffs by hand so i guess creating a margins/pip calculator in excel will save you lots of time
  • #13
  • Jan 25, 2011 10:53pm Jan 25, 2011 10:53pm
The foreign exchange market is a zero sum game in which there are many experienced well-capitalized professional traders (e.g. working for banks) who can devote their attention full time to trading. An inexperienced retail trader will have a significant information disadvantage compared to these traders.
Retail traders are - almost by definition - undercapitalized. Thus they are subject to the problem of gambler's ruin. In a "Fair Game" (one with no information advantages) between two players that continues until one trader goes bankrupt, the player with the lower amount of capital has a higher probability of going bankrupt first. Since the retail speculator is effectively playing against the market as a whole - which has nearly infinite capital - he will almost certainly go bankrupt. The retail trader always pays the bid/ask spread which makes his odds of winning less than those of a fair game. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade may be "resettled" each day, each time costing the full bid/ask spread.
The Black Swan: The Impact of the Highly Improbable
  • #14
  • Jan 26, 2011 7:22am Jan 26, 2011 7:22am
Quoting MapleLeaf
The foreign exchange market is a zero sum game in which there are many experienced well-capitalized professional traders (e.g. working for banks) who can devote their attention full time to trading. An inexperienced retail trader will have a significant information disadvantage compared to these traders.
Retail traders are - almost by definition - undercapitalized. Thus they are subject to the problem of gambler's ruin. In a "Fair Game" (one with no information advantages) between two players...
I see that someone learned how to copy and paste.
  • #15
  • Jan 26, 2011 1:44pm Jan 26, 2011 1:44pm
Quoting traderjai_inhi
I see that someone learned how to copy and paste.
Well, it's a little harder than searching in google. Or at least take the time and effort to copy, paste and trying to be sherlock holmes, for nothing.

Anyway, my point was valid, using my words or another person's. Try not to go out of the point.
The Black Swan: The Impact of the Highly Improbable
  • #16
  • May 11, 2016 11:50pm May 11, 2016 11:50pm
A Great Forex Trading Course - Work smarter, Not harder (15 Videos)
  • #17
  • Last Post: Oct 18, 2020 2:23pm Oct 18, 2020 2:23pm
Leverage is basically a kind of borrowed money. You need to makr the best use of the leverage...
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