Using free margin as a stop? | Forex Factory

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Using free margin as a stop?

  • #1
  • First Post: Edited Jul 11, 2012 1:20am Jul 10, 2012 8:31pm | Edited Jul 11, 2012 1:20am
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
Trading the largest lot size available with your current leverage/balance, while leaving the amount/% You are willing to risk on a (just one) trade as free margin.
You would not be risking anymore then "your trading plan" dictates but would be utilising your leverage to its fullest...
I know all crims are not created equal, and do things different...
What are the downfalls to applying this?
  • #2
  • Jul 11, 2012 2:00am Jul 11, 2012 2:00am
Not quite true. What if price gaps over a weekend and moves 100 pips against you? That would put your account balance in a negative.
  • #3
  • Jul 11, 2012 4:48am Jul 11, 2012 4:48am
i heard it all
  • #4
  • Jul 11, 2012 10:51am Jul 11, 2012 10:51am
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
Quoting PoundTrader
i heard it all
Not saying its a good idea, nor do I do it. just asking a question
  • #5
  • Jul 11, 2012 12:59pm Jul 11, 2012 12:59pm
So if you are stopped out, you have to refund the account before you can place a trade?
Gone to a better place
  • #6
  • Jul 11, 2012 1:46pm Jul 11, 2012 1:46pm
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
Just saying if i was willing to risk say $100 on a trade I would place a trade using a lot size that would only leave $100 as free margin, if the trade goes against me and I run out of free margin (it gets to $0) the broker automatically closes the trade, and I loose $100 of my account balance.
But if it goes my way I would in turn be using the largest lot size possible while still only risking the $100
Willf had a good point with the weekend gap...
I know it sounds screwy, but was just wondering if its ever been done deliberately.
  • #7
  • Jul 11, 2012 4:39pm Jul 11, 2012 4:39pm
Quoting fivex
Just saying if i was willing to risk say $100 on a trade I would place a trade using a lot size that would only leave $100 as free margin, if the trade goes against me and I run out of free margin (it gets to $0) the broker automatically closes the trade, and I loose $100 of my account balance.
But if it goes my way I would in turn be using the largest lot size possible while still only risking the $100
Willf had a good point with the weekend gap...
I know it sounds screwy, but was just wondering if its ever been done deliberately.
Similar:
Trade with a broke r that margin-calls you long before you run out of money -- FXCM does this, I think (not recommending them, by the way).
Then, realizing price will go the other way the next minute, enter a new order after the margin call and earn, overall, a few percent.

You really have to have the stomach for big, wild swings such as this, trading near margin call.


-- And, of course, not considering doing it (again), just sayin'.
  • #8
  • Jul 11, 2012 5:55pm Jul 11, 2012 5:55pm
What is your desired leverage level?


Quoting fivex
Just saying if i was willing to risk say $100 on a trade I would place a trade using a lot size that would only leave $100 as free margin, if the trade goes against me and I run out of free margin (it gets to $0) the broker automatically closes the trade, and I loose $100 of my account balance.
But if it goes my way I would in turn be using the largest lot size possible while still only risking the $100
Willf had a good point with the weekend gap...
I know it sounds screwy, but was just wondering if its ever been done deliberately.
  • #9
  • Jul 12, 2012 9:49am Jul 12, 2012 9:49am
This sir, is called gambling.


I did it once or twice when I feel rich enough to waste money but too poor to spend it in Vegas. I set up an account just for this. Heads, I win big, and move the profit to some other account. Tails, I lose and gets margin called.
  • #10
  • Jul 12, 2012 10:01pm Jul 12, 2012 10:01pm
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
Quoting maxslasher
This sir, is called gambling.


I did it once or twice when I feel rich enough to waste money but too poor to spend it in Vegas. I set up an account just for this. Heads, I win big, and move the profit to some other account. Tails, I lose and gets margin called.
Yeah I like to gamble
I dont see it as gambling anymore then a "normal" trade, if you figure your lot size and have your desired risk amount remaining in/as FREE MARGIN why is it anymore risky then placing a stop at/with the same risk amount?
you are at risk of loosing the same %/$ either way, but would be using a larger lot size then "you" typically do if the trade goes in your direction.
  • #11
  • Jul 16, 2012 9:26pm Jul 16, 2012 9:26pm
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
still looking for the reason why this is a shitty Idea?
  • #12
  • Jul 30, 2012 12:19pm Jul 30, 2012 12:19pm
Quoting fivex
Trading the largest lot size available with your current leverage/balance, while leaving the amount/% You are willing to risk on a (just one) trade as free margin.
You would not be risking anymore then "your trading plan" dictates but would be utilising your leverage to its fullest...
I know all crims are not created equal, and do things different...
What are the downfalls to applying this?

you get the margin call when you margin level reach 100% or under but most brokers set their stop-out level about 60% or 50% and some even near 30% margin level so you would not be risking only the free margin but plus half or even more of the margin used

so for example lets say you have 500 $ in your balance and use 1000 leverage and enter sell EUR/USD 1 lot your margin would be 120$ so you wont be stopped out until you lose all the free margin (which is 380 $) plus half of the margin used 60$ eventually you would end up with less than 50$ on ur account if you lose
  • #13
  • Jul 31, 2012 8:42am Jul 31, 2012 8:42am
Quoting fivex
still looking for the reason why this is a shitty Idea?
because your reason for closing the trade no longer has anything to do with the trading being good or not
  • #14
  • Jul 31, 2012 11:47pm Jul 31, 2012 11:47pm
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
If your free margin gets to $0.00, your broker closes the trade, correct?
So if you hold X% of your account as free margin when you make a trade, you will loose the same X% if the trade goes wrong and your free margin goes down to $0.00.?
Using your leverage, and your lot size to determine what will be remaining as free margin so you are using the largest position available.
  • #15
  • Aug 1, 2012 12:02am Aug 1, 2012 12:02am
Quote
If your free margin gets to $0.00, your broker closes the trade, correct?


depending on the broker or the stop-out


if the stop-out level is 100% then yes when you lose all the free margin the broker closes your trade

bear in mind that the higher levergae the less required margin
  • #16
  • Aug 1, 2012 12:31am Aug 1, 2012 12:31am
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
Quoting hamad00
depending on the broker or the stop-out


if the stop-out level is 100% then yes when you lose all the free margin the broker closes your trade

bear in mind that the higher levergae the less required margin
Fair enough, thanks for the input
  • #17
  • Aug 9, 2012 8:35pm Aug 9, 2012 8:35pm
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
So if you also calculate "your" brokers stop-out% into the equation would it not do the same thing?
I have been trying it on a small live account and it "works" it creates a stop at my set $ amount of risk. (we are are all here for $'s not pips)
You trust em with SL/TP... its the same thing but using all your leverage to its fullest.
  • #18
  • Aug 9, 2012 9:01pm Aug 9, 2012 9:01pm
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
Also saying "it works" is me trying to scalp, and loosing.
I am not scalper, i have taken $ losses but knew my risk $ amount by looking at my free margin:
  • #19
  • Aug 10, 2012 1:07pm Aug 10, 2012 1:07pm
Quoting fivex
still looking for the reason why this is a shitty Idea?
It's a shitty idea cause you don't know what you are doing.

Free margin is the amt of money left to add more trades. What I am understanding you to say is that you : example: have 1000$. Put on a trade adn have 100$ left in your "free margin" as i have defined above. So you have 900$ at risk. If I understand what u are sayign - once the 100 is gone (trade goes against you 100) you want the trade closed. Don't work that way - once the trade goes against you approx 500$ (talking Oanda at 50:1) Oanda wil close. So u lost 500 - not the 100 u inteneded to lose.

If you intended to just lose the 100 - then use a stop loss.
In trading, there is no bullshit. You either make money or you don't.
  • #20
  • Edited Aug 11, 2012 11:31am Aug 10, 2012 2:02pm | Edited Aug 11, 2012 11:31am
  •  fivex
  • | Joined Sep 2011 | Status: This is the title that appears | 247 Posts
If I have $100 remaining as free margin, that's what I am at risk of losing.
@lpari us closes the trade if free margin reaches $0, This happens when the trade is down $100
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