Margin requirement questions of a veteran "rookie"

I have been involved in forex since about 2005 (and a member here since 2006). However, I have only dabbled in it during all this time and taken demo trades only - but even then only every once in a while and not on any consistent basis during these past 9 years. After all these years, I'm finally getting serious about trading with actual money. I've found a style of trading I'm comfortable with and I'm going to give it a try with real money. So, in the sense of trading with a REAL money account, I guess you can say I'm an absolute "rookie". I simply do not understand the amount money we need to cover the margin requirements of brokers. Therefore, I have these questions about the amount of margin requirements we need to have in order to be able to trade:

1. I will have Oanda as my broker. I might have as many as 10 trades opened at one time (but very rarely). However, I generally have around 5 trades opened at any point in time. I use a 2:1 ratio of 25 pip stop loss and 50 pip target. I plan to trade $1 per pip. Therefore, in general, how much do I need to have in my trading account to cover my margin requirements (or any other financial requirements for that matter)... so I won't have any of my trades interrupted due to margin requirements?

2. Or, if the the above question is too hard to answer, due to whatever reason, then how about this question: In general, If I have $1000 in my trading account, how much of that money can actually be traded with? (With margin requirements, obviously the entire $1000 cannot be used). Or another way of saying it, do the brokers allow us to only trade with 10% of the money we have in our account? ... or 20%? ... or 30%? or more? (with the remaining percentage being the margin requirement?)

3. In regards to regulated brokers, is it required that all regulated brokers used the exact same margin requirements?

I would appreciate you guys helping out an old veteran "rookie" with my above margin questions.

1. Take your lot size and divide by your leverage to get the margin amount. $1/pip = micro lot(10,000 units). assuming standard 50:1 leverage you'd need to put forward $200 from your account for every trade
2. margin calls depend on your broker, most give you a warning at 120% and start closing your trades below 100%. the margin ratio is calculated as equity/outstanding margin. there's no limit to how many open trades you can have as long as you stay above 100% equity:margin
3. US brokers are limited to 50:1 leverage ratios

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hey naizarak..... doesn't that only work with pairs beginning with usd ...... you might find the eur pairs have a margin required of 262 ...... and the gbp pairs have a margin required of 331..... aud's are 186 ...... and so on......

speakin in terms of a mini account..... standards would be x10 .....h

yeah you're right i was just using USD because i assume OP is in the US. for other currencies you'd have to do a conversion. and yeah, 10,000 lots is a mini account. micro would be 1,000. got the 2 mixed up

naizarak, thanks for answering my questions. However, I'd like to simplify it into a very simple process by asking this question (this question is not only for naizarak, but for anyone else of whom may also know the answer) :

(This is question is totally for example purposes). Therefore, using this specific example: If I had $1000 dollars (U.S. Dollars ... because I live in the United States), and I made 10 different trades all at once, and each trade involved exactly $1 per pip (with none of the pairs needing a conversion), would my account of $1000 be large enough to make all those trades at once? (as I wrote earlier I will be using a 25 pip SL and 2:1 R/R ratio, if that is of any importance to this example). If $1000 is not enough to make the 10 trades AND handle the margin requirement, then would an account of $2000 be enough to cover all the requirements of the example I've just given?

naizarak, I know your earlier reply is a more accurate answer to my original question, but I would just like to know in general if $1000 is enough to the requrements for my example in the above paragraph (or would I need $2000 ... or more?)

You can adjust your lot size to anything you want to make your margin use comfortable. On Oanda, when you are entering a trade, when you enter how many units your lot size it, the trade calculator will instantly tell you how much margin is required. Oanda allows trading in pip amounts of fractions of cents. If you want to have 10 trades on, and want to keep your margin use at 50%, you just adjust your unit size so that each trade is using 5% of your margin, whatever that amount might be.

And, by the way, for $1 a pip on a USD based trade, the margin requirement is around $300, so no, $1000 is not enough to have 10 trades on.

assuming you're trading EURUSD, you'd need 10,000 units to earn $1/pip. 10,000 units EUR = ~13,000 USD

13,000 / 50 = 260

You'd need $260 per trade. So for 10 open trades that would be over $2500

naizarak, thank you very much! Your answer helps me very much to know - in general - how much money I need in my trading account. I will be sure to have between $2500 to $3000 in my account.

Also, thank you to hayseed and trevwest for your contributions to this thread.

If anyone else has anything else to add or any thoughts about my example in my previous post, then I would be intested to see your response.

On top of that, if you did have $2500 and 10 trades on, if they all hit their 25 pip stop, you would lose $250.. 10% of your account gone. In my opinion at $2500, at $1 a pip, you shouldnt have more than 1 trade, risking 1%..

I've been lately thinking about this whole "margin requirement" mess. So let me get this straight: If I compounded my profits to, say, about $25,000.... wouldn't the margin requirement be SO huge that it would be very difficult for most people - including me - to be able to afford the margin requirement? In my situation, a possibly exists that my EA might take as many as 10 trades at one time (though rarely). Therefore, my guess is that I would need an additional $25K - $50k in my trading account just to cover my margin requirement! Am I basically correct in my assessment?

With the above in mind, then how in the world can most people hope to get rich in forex if the margin requirement will be VERY huge... assuming the trader is skillful enough to grow his account substantially? Am I correct in saying that no matter how much you grow your account, you will always need access to a substantial amount of money in order to cover the larger margin requirement as your account grows? Unless a person is already rich, then they most likely don't have an extra $25K, $50k, $100K or whatever amount to cover their margin requirement (assuming the person happens to hit it big in forex).

Is everything I say above basically true - meaning it will be impossible for most people to afford the margin requirement at some point (once they build their account to a large amount of money)? Or, am I just confused about this entire issue of margin requirement for large trading accounts?

Can anyone shed some light on this subject? Or at least give your opinion about the possible difficulty of trading an account with a large margin requirement?

P.S. - One more question: Due to the fact that the United States brokers are limited to 50:1 leverage, does that cause the margin requirements to be higher for us American citizens? Do citizens in countries outside the U.S. have it easier in regards to margin requirements ... due to the luxury of having 200:1 and 400:1 leverage ratios? Or does the leverage not affect the margin requirement whatsoever?

I have another question that may sound silly, but I hope someone can answer this question:

If, for example, I have $1000 in my mini-account to trade with, and $3000 more to cover the margin costs (equals a grand total of $4000 I have invested), and if I end up blowing the $1000 by making bad trades, then what happens to the $3000 I have in my account for the margin that is left over? Is that money also taken away from me by the broker? Or can I request for the broker to send it back to me if I want?

You are asking about margin call, and i think you should rethinking of your method, is it have a stoploss? If you can't say what's the biggest loss you could take you will burn your account for sure.

Hi Bro, basically Naizarak and Hayseed had summed it up. But to add on, the margin you require to open a $1/pip trade depend on which pairs you are trading and the leverage you are on.

I have per pip to dollar data on my spreadsheet, if you need it, I can send you in private, if it's still on my system. But it's not updated to the recent prices, as prices change, the per pip value will be different.

Yes, if you still have the spreadsheet then if you could, please sent it to me. Thanks.

Thank you for the advice. Yes, I do use a stop loss. I will be very careful about a margin call, but sometimes things happen that we don't expect and it IS possible a margin call can happen.

But my question still remains to whomever can answer it. Here is my question again: If, for example, I have $1000 in my mini-account to trade with, and $3000 more to cover the margin costs (equals a grand total of $4000 I have invested), and if I end up blowing the $1000 by making bad trades, then what happens to the $3000 I have in my account for the margin? Is that money also taken away from me by the broker? Or can I request for the broker to send it back to me if I want?

I am very surprised that not one person here at Forex Factory knew the answer to my question. It seems like a basic question for those of you trading with real money, yet you do not know whether or not we can get our margin money returned to us??

Therefore, what I did was contact a broker through their live chat and I asked them my question. Here below is what I asked them and their reply:

I asked them, "If I deposited $1000 into my trading account to trade with, and I also deposited $500 to cover my margin - and if I end up making bad trades to lose my $1000, then would I get my $500 back for the margin money? Or, is that money also gone?

They said, "If you deposited $1500 to your account and you loose $1000, yes you can get back your $500".

So, yes, we DO get back our margin money if we blow our initial trading account. But hopefully we will never experience such a thing!