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Lot size and margin call

  • #1
  • First Post: Mar 20, 2012 10:53am Mar 20, 2012 10:53am
Hi,

I've a question on how to determine the lot size for a trade. Let's say I've a 100$ mini account. I don't want to risk more than 4% per trade, that's is 4$.

Then if I'm using a 10 pips stoploss and 1 lot on a mini account is worth 1$ per pip, then I should open a trade with 0.4 lots. Then I open a second trade with same stoploss and same lot size. But the orders are closed before they reached the stoploss due to a margin call. How is it possible?
  • #2
  • Mar 21, 2012 6:01am Mar 21, 2012 6:01am
Quoting dvarrin
Hi,

I've a question on how to determine the lot size for a trade. Let's say I've a 100$ mini account. I don't want to risk more than 4% per trade, that's is 4$.

Then if I'm using a 10 pips stoploss and 1 lot on a mini account is worth 1$ per pip, then I should open a trade with 0.4 lots. Then I open a second trade with same stoploss and same lot size. But the orders are closed before they reached the stoploss due to a margin call. How is it possible?
If your leverage is 10:1 then 100 equals 1000 trading amount. If your leverage is 100:1, in other words for every dollar you put up the broker lets you trade 10,000. So if you trade .40 lots you are trying to trade a lot more money than you have on account. If you want to trade 4% of your account you should be trading 4 pennies for every 100 dollars. .40 would be 40% of your account and would cause a margin call very quickly. That is if you have a penny broker. If you have a dime broker .01 equals ten cents instead of one penny you would be trading 10% of your account on a trade. So dial down your lots size. .01,.40 is not the monetary amount it is the lot size. Depending on your broker .01 could be a penny or it could be a dime when you are trading USD. Other currencies would be different amounts depending on the exchange rate.
  • #3
  • Mar 21, 2012 6:05am Mar 21, 2012 6:05am
Quoting nanningbob
If your leverage is 10:1 then 100 equals 1000 trading amount. If your leverage is 100:1, in other words for every dollar you put up the broker lets you trade 10,000.
I guess you meant to say " lev is 100:1.... for every 100$.... broker lets you trade 10,000"
  • #4
  • Mar 21, 2012 6:15am Mar 21, 2012 6:15am
Quoting dvarrin
Hi,

I've a question on how to determine the lot size for a trade. Let's say I've a 100$ mini account. I don't want to risk more than 4% per trade, that's is 4$.

Then if I'm using a 10 pips stoploss and 1 lot on a mini account is worth 1$ per pip, then I should open a trade with 0.4 lots. Then I open a second trade with same stoploss and same lot size. But the orders are closed before they reached the stoploss due to a margin call. How is it possible?
1 lot = 100.000 unit
in a mini account, 1 lot it's still 1 lot.
0.1 would be a mini, the 1$ a pip value.

If you are trying to trade 0.4lot, you might be using 4 mini lot, hence the margin call.
Then if your broker calls 1 mini as 1 lot.... I don't know
  • #5
  • Mar 22, 2012 10:48am Mar 22, 2012 10:48am
Quoting dvarrin
Hi,

I've a question on how to determine the lot size for a trade. Let's say I've a 100$ mini account. I don't want to risk more than 4% per trade, that's is 4$.

Then if I'm using a 10 pips stoploss and 1 lot on a mini account is worth 1$ per pip, then I should open a trade with 0.4 lots. Then I open a second trade with same stoploss and same lot size. But the orders are closed before they reached the stoploss due to a margin call. How is it possible?
This thread just got derailed anyway the margin call is usually sent when the trade exceeds the factored risk and in this case, it would be the 4%.
Here's a tip, with small account balance, you may not have much leg room to maneuver..
Check with your broker as regards the pip value, lot size, leverage, etc.
  • #6
  • Mar 22, 2012 10:55pm Mar 22, 2012 10:55pm
I think a margin call is called when your equity falls below 50% of the entire account.
  • #7
  • Mar 25, 2012 1:31am Mar 25, 2012 1:31am
Quoting nanningbob

If your leverage is 100:1, in other words for every dollar you put up the broker lets you trade 10,000.
Huh
  • #8
  • Mar 25, 2012 1:34am Mar 25, 2012 1:34am
Quoting dvarrin
Hi,

I've a question on how to determine the lot size for a trade. Let's say I've a 100$ mini account. I don't want to risk more than 4% per trade, that's is 4$.

Then if I'm using a 10 pips stoploss and 1 lot on a mini account is worth 1$ per pip, then I should open a trade with 0.4 lots. Then I open a second trade with same stoploss and same lot size. But the orders are closed before they reached the stoploss due to a margin call. How is it possible?
Which broker, what margin requirement?
  • #9
  • Mar 25, 2012 1:35am Mar 25, 2012 1:35am
Quoting pipmutt
Huh
isnt it suppposed to be $100?

lets say i have $1000 and i trade 1 micro lot thats 1:1 leverage. if i use 1:10 i am trading one mini lot which value is $10,000 right?

so i think its $100

who knows i could be 'huhed' as well
Have I got something on my face, SOLDIER?
  • #10
  • Mar 25, 2012 1:41am Mar 25, 2012 1:41am
Quoting bumapatria

isnt it suppposed to be $100?
You're right 100 at 100:1 would be 10,000

nanningbob's dollar at 100:1 would be 100 not 10,000 as he stated hence the huh

It's ok, the guy puts himself across as an experienced trader on other threads but some of his posts suggest the opposite, it's a long story with history.....
  • #11
  • Mar 25, 2012 7:18am Mar 25, 2012 7:18am
Quoting cesare76fx
I guess you meant to say " lev is 100:1.... for every 100$.... broker lets you trade 10,000"
Thanks for the catch on the typo error.
  • #12
  • Mar 25, 2012 8:09am Mar 25, 2012 8:09am
Quoting nanningbob

Thanks for the catch on the typo error.
'Typo'? More like 'thinko'!

But hey what's an extra couple of zeros in this game, 100...10,000....yeah an easy mistake to make for an old pro like you.....
  • #13
  • Mar 25, 2012 8:36am Mar 25, 2012 8:36am
Quoting pipmutt
'Typo'? More like 'thinko'!

But hey what's an extra couple of zeros in this game, 100...10,000....yeah an easy mistake to make for an old pro like you.....
somehow i think ure picking on him pipmutt
Have I got something on my face, SOLDIER?
  • #14
  • Mar 28, 2012 4:51am Mar 28, 2012 4:51am
Quoting dvarrin
Hi,

I've a question on how to determine the lot size for a trade. Let's say I've a 100$ mini account. I don't want to risk more than 4% per trade, that's is 4$.

Then if I'm using a 10 pips stoploss and 1 lot on a mini account is worth 1$ per pip, then I should open a trade with 0.4 lots. Then I open a second trade with same stoploss and same lot size. But the orders are closed before they reached the stoploss due to a margin call. How is it possible?
okay. so if what you say is true and 1 lot is equal to 1 dollar per pip on a mini account, since typically 1 lot = 100,000 units = 10 dollars per pip (on eurusd), then you have your risk calculated right.

what you need to determine is your margin/ leverage.

if you have a 2% margin, it is equal to 50:1 leverage.

i am assuming your account is 0.5% margin, equal to 200:1 leverage.

this is why I am assuming this.

10,000 units of EURUSD is 1$ per pip, and at an exchange rate of 1.3359 (current exchange rate), is equal to $13,359. if your broker gives you 200:1 leverage, then you only need 0.5% of 13,359 in your account to place a trade of 10,000 units. this is 66.795 dollars in your account. So yes, with a 100 dollar account you can trade 10,000 units just fine.

when you placed the second order, that was when the problem occurred. another $66.795 order into your account made your total margin usage more than the 100 dollars in your account, you were trading $133.59 margin's worth on a 100 dollar account. that is why you got margin called i believe. you were trading $66,795 of currency with $133.59 on a 100 dollar account.

lastly, if you don't want to risk more than 4% on a trade, don't put in another trade on the same currency pair!! that increases your risk to 8%, unless you cut down your stop loss to 5 pips for both trades, which is also not recommended.
  • #15
  • Mar 28, 2012 11:13am Mar 28, 2012 11:13am
more likely though, you weren't trading EURUSD and you put in an order for a pair that was USDXXX, am I right?

with .5% margin, you could put up 50 bucks and trade 10,000 units of any USDXXX pair, which is equal to 10,000 USD. (10,000USD * .005margin =$50)

so maybe you gained a pip or two and wanted to put in another order. that means you used up your entire account of 100 bucks on two orders (50 bucks each), any loss occurring then would put you over 100% margin utilization. hence the margin call.
  • #16
  • Mar 28, 2012 2:38pm Mar 28, 2012 2:38pm
asdfasdf.

okay, I read all of that wrong, you said you traded 2 orders, each worth 40 cents a pip? so that would be 4000 units per trade.

that means you probably have a 1% margin requirement or 100:1 leverage.

a 4000 unit trade on EURUSD would cost about $53.28 to your account with that kind of leverage (since w/ exchange rate 1.332 the total worth of 4000 units is $5328)

a second order of the same size would put the total cost to $106.56, which is why your $100 account got margin called.

be careful with your margin!

sorry about not reading carefully (not doing this on purpose to get more posts so i can become a new member here lol)
  • #17
  • Mar 29, 2012 4:01am Mar 29, 2012 4:01am
Well, you need to control the correct account size and make it as small as you could.
  • #18
  • Mar 29, 2012 9:01am Mar 29, 2012 9:01am
I'd be wary of brokers which offer high leverage,and fixed 10000 units those are normally a double edge sword resulting in margin calls on mini accounts, been there, done that. I switched to Oanda. Their max leverage is 50:1. I on practice account dragged it down from the preset $100000 they started it with to $188 its up to $350 now that's over several months.Problem with forex is people think they can get rich quick and they end up getting poor quick. My goal was to double account over 3 months, did not make it, it been about 6 months. That good anyways because if that same money was in the bank I probably make 2 cents in interest over 6 months.

With $100 in a mini account i would trade no more than 1000 units on any trade, once you got up to around $250 you could trade 10000 units, and could probably hold that trade for several days . its way over what I should use and i think that is why many people with mini accounts just loose all their money. It is my view that A $2500 account should be trading 10000 units, if that turn you can hold the trade for months if you have to and never get a margin call. Get a practice account with oanda, it never expires start it at $100 and you can test your strategies with as little as 10 units and loose nothing but a few imaginary pennies.
Stop thinking like a retail trader
Forextrinitrader3.0 Profit This Month: na
  • #19
  • Mar 29, 2012 12:44pm Mar 29, 2012 12:44pm
Quoting forextrini1
I'd be wary of brokers which offer high leverage,and fixed 10000 units those are normally a double edge sword resulting in margin calls on mini accounts, been there, done that. I switched to Oanda. Their max leverage is 50:1. I on practice account dragged it down from the preset $100000 they started it with to $188 its up to $350 now that's over several months.Problem with forex is people think they can get rich quick and they end up getting poor quick. My goal was to double account over 3 months, did not make it, it been about 6 months. That good...
There is something fundamentally wrong with just about everything in that post!
  • #20
  • Apr 12, 2012 8:46am Apr 12, 2012 8:46am
Quoting pipmutt
There is something fundamentally wrong with just about everything in that post!

huh??? You could find stuff fundamentally wrong with every post pipmutt, but thats your opinion.This is America, I'm free to have my own opinions. Your way is not the only way pipmutt, we are all here to learn, without stuffing a sock down someone throat if they say something you do not agree with.

So either you

1. Provide us all a clear explaination of the fundamentals on how you made your millions in the forex(tho I seriously doubth it else you wont be sitting in a forex forum) , or

2. Just be quiet if you not nothing positive to say.
Stop thinking like a retail trader
Forextrinitrader3.0 Profit This Month: na
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