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Margin Call

  • #1
  • First Post: Aug 17, 2006 5:04am Aug 17, 2006 5:04am
Does anybody have some experience with Margin Call?

I already had few times margin call and usualy after Margin Call I still had Used Margin amount in my account (for exapmple if I trade with 13 standart lots, after Margin Call I still have 13 Lots amount in my account).
Today I had bad experience with my broker - I had Margin Call and my broker took away more money than normally they do! Now I am looking on my 11 Lots amount and I am confused what's happened???

Does anybody have similar experience?
If you can't solve a problem, it's because you're playing by the rules.
  • #2
  • Aug 17, 2006 5:17am Aug 17, 2006 5:17am
ask your broker why did it happen.

it looks like the exit order got filled a bit deeper in red. maybe the price gapped or the spread was increased or something like that.

anyways, ask your broker.
  • #3
  • Aug 17, 2006 5:36am Aug 17, 2006 5:36am
Quoting piccolo
ask your broker why did it happen.

it looks like the exit order got filled a bit deeper in red. maybe the price gapped or the spread was increased or something like that.

anyways, ask your broker.

seems you are the only one who want to help me, thanks Piccolo!!http://www.forexfactory.com/forexfor...cons/icon7.gif
If you can't solve a problem, it's because you're playing by the rules.
  • #4
  • Aug 17, 2006 5:42am Aug 17, 2006 5:42am
I dont think everyone here have experiences with margin calls Ainars777. And I think it depends on the broker and the leverage being used.



Quoting ainars777
seems you are the only one who want to help me, thanks Piccolo!!http://www.forexfactory.com/forexfor...cons/icon7.gif
  • #5
  • Aug 17, 2006 6:06am Aug 17, 2006 6:06am
A good way to avoid getting margin calls is not trade such larger lots and set stops.

I learned the hard way!!!!!!!!!
  • #6
  • Aug 17, 2006 6:16am Aug 17, 2006 6:16am
Quoting adv9296
A good way to avoid getting margin calls is not trade such larger lots and set stops.

I learned the hard way!!!!!!!!!

I see we are talking in different languages http://www.forexfactory.com/forexfor...cons/icon7.gif
Sorry but I am not first day in the market!
Thanks for your advise and good luck!http://www.forexfactory.com/forexfor...ons/icon12.gif
If you can't solve a problem, it's because you're playing by the rules.
  • #7
  • Aug 17, 2006 6:40am Aug 17, 2006 6:40am
Quoting ainars777
Does anybody have some experience with Margin Call?

I already had few times margin call and usualy after Margin Call I still had Used Margin amount in my account (for exapmple if I trade with 13 standart lots, after Margin Call I still have 13 Lots amount in my account).
Today I had bad experience with my broker - I had Margin Call and my broker took away more money than normally they do! Now I am looking on my 11 Lots amount and I am confused what's happened???

Does anybody have similar experience?

THAT SEEMS STRANGE.
CONTACT YOUR BROKER ASAP AND CHECK WHAT HAPPEND.
YOU GOTTA MOVE QUICK THOUGH CAUSE THERE MIGHT BE A CERTAIN TIME DELAY YOU CAN STILL CONTEST STG LIKE THAT
  • #8
  • Aug 17, 2006 8:02am Aug 17, 2006 8:02am
Can you use a margin call as a stop loss?

This week I used almost my whole margin on some news events which fortunately went my way in this case. What would have happened if the trades went wrong? I was just experimenting a little...

For example with 1:200 leverage and an account of $5000. Maximum possible lot size is 10 lots in this case. Say I create an entry order for 9 lots. Do I only lose 10% of the account if I get whipsawn and the margin call is triggerd? So normally I would have $4500 if I get margin called. Is this correct. And what if the price gaps will I lose more than only 10%?

Will I get any warnings if I get too much margin calls? Well I never had any warnigns in the past when I was blowing up my account, but I figured if you're profitable things may be different.

Sorry for all the questions! I would appreciate any help or advice you can give.

By the way I use this only when I am pretty sure there will be a big movement in one direction.
  • #9
  • Aug 17, 2006 8:13am Aug 17, 2006 8:13am
There are a few reasons it might have happened. The one that comes to my mind because it happened to me is maybe you got zapped with interest. Or like someone else in the thread said, maybe your order got filled at a different price.
I dream, therefore I become.
  • #10
  • Aug 17, 2006 8:15am Aug 17, 2006 8:15am
Zed seems to me you are gambling here. Anyhow to answer your question. A margin call means that your account is pretty much wiped out. Maybe there will be 10% or so of the value left... thats about it.



Quoting ZedHashPip
Can you use a margin call as a stop loss?

This week I used almost my whole margin on some news events which fortunately went my way in this case. What would have happened if the trades went wrong? I was just experimenting a little...

For example with 1:200 leverage and an account of $5000. Maximum possible lot size is 10 lots in this case. Say I create an entry order for 9 lots. Do I only lose 10% of the account if I get whipsawn and the margin call is triggerd? So normally I would have $4500 if I get margin called. Is this correct. And what if the price gaps will I lose more than only 10%?

Will I get any warnings if I get too much margin calls? Well I never had any warnigns in the past when I was blowing up my account, but I figured if you're profitable things may be different.

Sorry for all the questions! I would appreciate any help or advice you can give.

By the way I use this only when I am pretty sure there will be a big movement in one direction.
  • #11
  • Aug 17, 2006 8:30am Aug 17, 2006 8:30am
Quoting Yardie
Zed seems to me you are gambling here. Anyhow to answer your question. A margin call means that your account is pretty much wiped out. Maybe there will be 10% or so of the value left... thats about it.
I tripled my account this week using this method, but I figured big gains would mean big risks. I tested this using the demo account first. So my logic is flawed? If I use 90% of the margin shouldn't a margin call get triggered as soon as I lose more than 10%? I understood that if the price gaps I could lose a considerable amount of money, but under normal market conditions I should be fine, right?

Could anyone explain in details?

If what you say is true Yardie I'm lucky for not getting burned because a considerable amount of money was in play...
  • #12
  • Aug 17, 2006 8:35am Aug 17, 2006 8:35am
A margin call is triggered when you equity gets too low. It wont be triggered at 10%. You have to set a stop loss if you want to avoid a margin call. Consider yourself lucky for tripling your account. If you continue you will lose it all in the future.



Quoting ZedHashPip
I tripled my account this week using this method, but I figured big gains would mean big risks. I tested this using the demo account first. So my logic is flawed? If I use 90% of the margin shouldn't a margin call get triggered as soon as I lose more than 10%? I understood that if the price gaps I could lose a considerable amount of money, but under normal market conditions I should be fine, right?

Could anyone explain in details?

If what you say is true Yardie I'm lucky for not getting burned because a considerable amount of money was in play...
  • #13
  • Aug 17, 2006 8:44am Aug 17, 2006 8:44am
Quoting ZedHashPip
Can you use a margin call as a stop loss?

This week I used almost my whole margin on some news events which fortunately went my way in this case. What would have happened if the trades went wrong? I was just experimenting a little...

For example with 1:200 leverage and an account of $5000. Maximum possible lot size is 10 lots in this case. Say I create an entry order for 9 lots. Do I only lose 10% of the account if I get whipsawn and the margin call is triggerd? So normally I would have $4500 if I get margin called. Is this correct. And what if the price gaps will I lose more than only 10%?

Will I get any warnings if I get too much margin calls? Well I never had any warnigns in the past when I was blowing up my account, but I figured if you're profitable things may be different.

Sorry for all the questions! I would appreciate any help or advice you can give.

By the way I use this only when I am pretty sure there will be a big movement in one direction.
ZedHashPip,

Your numbers look a little off to me. I think it depends on the currency pair, too. That might be the discrepancy. Remember that if USD is not the base currency (EURUSD, GBPUSD, etc.), you have to convert the margin about back to dollars. Here's an example.

Balance: 5000
Leverage: 200:1
EURUSD Rate: 1.2800
Lots: 10
Base Margin: 5000
USD Margin: 6400 (5000*1.2800)

In this case, your actual margin would exceed your balance, and you wouldn't be able to place the trade.

So, let's say that you used the maximum amount. The closest we get is 7.8 lots. The USD margin on that would be 4,992. Each pip movement is $780. Your available margin is $8.00. A margin call will occur when your account goes beyond 4992, or -64 pips. At -64 pips, you would be left with $8.00 in your account.

Some people, however, do use margin calls as exits as part of their strategy. They are just not leveraged to the hilt. One trader friend I know - Greg Gibbs - says that there are 3 ways to exit a bad position - to stop out, to margin out, and to chicken out!

Regards,

stockwet
  • #14
  • Aug 17, 2006 8:45am Aug 17, 2006 8:45am
Quoting Yardie
A margin call is triggered when you equity gets too low. It wont be triggered at 10%. You have to set a stop loss if you want to avoid a margin call. Consider yourself lucky for tripling your account. If you continue you will lose it all in the future.
Okay thanks for pointing that out. I guess I'll go back to using my more conservative money management rules. Thanks for your advice!

All of a sudden I feel a very lucky guy!!!
  • #15
  • Aug 17, 2006 8:51am Aug 17, 2006 8:51am
Quoting ZedHashPip
Can you use a margin call as a stop loss?

This week I used almost my whole margin on some news events which fortunately went my way in this case. What would have happened if the trades went wrong? I was just experimenting a little...

For example with 1:200 leverage and an account of $5000. Maximum possible lot size is 10 lots in this case. Say I create an entry order for 9 lots. Do I only lose 10% of the account if I get whipsawn and the margin call is triggerd? So normally I would have $4500 if I get margin called. Is this correct. And what if the price gaps will I lose more than only 10%?

Will I get any warnings if I get too much margin calls? Well I never had any warnigns in the past when I was blowing up my account, but I figured if you're profitable things may be different.

Sorry for all the questions! I would appreciate any help or advice you can give.

By the way I use this only when I am pretty sure there will be a big movement in one direction.
NO you shouldn't use a margin call as a stop loss. I really hope you are talking about a demo account, and have no real money in the market. You need to understand what the trading requirements are (in terms of money) before you start randomly deciding how much to put on any one trade.

In my opinion, the numbers you are giving are astronomically large for the account size you are talking about. 9 standard lots on a 5k acct? You're crazy. Even if you are demoing, there is no reason to demo like that - if you do it in real life you'll blow up your whole account very, very quickly.

DO THE MATH ON YOUR OWN FOR YOUR TRADES. You should know what the margin requirements are for your broker. This is different for every broker, but I will explain the basic numbers and maybe that will help.

Lets say you have an account balance of $5,000 USD. If you want to trade 1 standard lot on lets say the cable (GBPUSD) that means that you are controlling 100,000 Pounds (not dollars) worth of currency. A standard lot means 100,000 of the first currency in the pair, to put it in laymen's terms. So roughly at the current exchange rate (1:1.9000) that would be the equivalent of $190,000 USD. Obviously you don't have that kind of cash laying around, so you are going to use your leverage with your broker. The MARGIN is the part that you have to put up in order to open this trade. So at 100:1 leverage you only have to put up one one hundredth of $190,000 ($1,900 usd) to open the trade. When you open this trade you still have 5k in your account, but now you have used 1900 of your "free margin" to open a trade. This means you have less free margin to open up another trade or lose or whatever. At one standard lot in this case every pip means $10 USD. This is why you would never, ever, ever want to trade 9 lots on a 5k account. Even with 200:1 leverage, the required margin to open that trade at the current exchange rate for the cable is $8550, it would be less on EURUSD, but your margin used shouldnt even be close to your total account balance. When it does - POOF - you can be liquidated

Rules and requirements are different for every broker and you should know your broker's requirements. If you are demoing, practice like you want to play. In the real world, nobody with any money management sense would trade the amounts you are talking about.

Just a tip, go for more pips and less lots - you'll become a better trader and you won't destroy your account
  • #16
  • Aug 17, 2006 8:55am Aug 17, 2006 8:55am
I think margin calls are simply brokers' right or option, not obligation, to liquidate your open positions in order to limit their risk, when the amount of your free margin goes too low, negative, or whatever situation your broker sees fit.
You may want to check with your broker to see what their policies are.
  • #17
  • Aug 17, 2006 9:09am Aug 17, 2006 9:09am
Quoting ZedHashPip
I tripled my account this week using this method, but I figured big gains would mean big risks. I tested this using the demo account first. So my logic is flawed? If I use 90% of the margin shouldn't a margin call get triggered as soon as I lose more than 10%? I understood that if the price gaps I could lose a considerable amount of money, but under normal market conditions I should be fine, right?

Could anyone explain in details?

If what you say is true Yardie I'm lucky for not getting burned because a considerable amount of money was in play...
Yardie is wrong and you are right. In early days I also have used intentionally and unintentionally a margin call as stoploss.

The only problem with margin calls is this: if you get the call you lost some money, thats OK but now you can't open a new trade with the same lot amount.. so you have to decrease your position size and its harder to make the lost money back.

Anyways, I wouldn't recommend using margin calls as SL because thats a broker thing. You can put a SL 1 pip before the Margin Call if you want to trade this style.

Here is some crazy math: $5k at 1:400 leverage. On a news event you open a 10 lot position with 25 pip stop (margin call).. if the trade stops out you loose 50% with change of your account. If the trade is right and it goes up for 100 pips.. you have made $10k and trippled your account in maybe 30 minutes, lol. Disclaimer: don't try this at home (live account)!
  • #18
  • Aug 17, 2006 9:16am Aug 17, 2006 9:16am
Well, he DID do it on a live account! And he claimed to have trippled his money in a week's time.

Its really crazy that he did it but he won the gamble!



Quoting americanteek
NO you shouldn't use a margin call as a stop loss. I really hope you are talking about a demo account, and have no real money in the market. You need to understand what the trading requirements are (in terms of money) before you start randomly deciding how much to put on any one trade.

In my opinion, the numbers you are giving are astronomically large for the account size you are talking about. 9 standard lots on a 5k acct? You're crazy. Even if you are demoing, there is no reason to demo like that - if you do it in real life you'll blow up your whole account very, very quickly.

DO THE MATH ON YOUR OWN FOR YOUR TRADES. You should know what the margin requirements are for your broker. This is different for every broker, but I will explain the basic numbers and maybe that will help.

Lets say you have an account balance of $5,000 USD. If you want to trade 1 standard lot on lets say the cable (GBPUSD) that means that you are controlling 100,000 Pounds (not dollars) worth of currency. A standard lot means 100,000 of the first currency in the pair, to put it in laymen's terms. So roughly at the current exchange rate (1:1.9000) that would be the equivalent of $190,000 USD. Obviously you don't have that kind of cash laying around, so you are going to use your leverage with your broker. The MARGIN is the part that you have to put up in order to open this trade. So at 100:1 leverage you only have to put up one one hundredth of $190,000 ($1,900 usd) to open the trade. When you open this trade you still have 5k in your account, but now you have used 1900 of your "free margin" to open a trade. This means you have less free margin to open up another trade or lose or whatever. At one standard lot in this case every pip means $10 USD. This is why you would never, ever, ever want to trade 9 lots on a 5k account. Even with 200:1 leverage, the required margin to open that trade at the current exchange rate for the cable is $8550, it would be less on EURUSD, but your margin used shouldnt even be close to your total account balance. When it does - POOF - you can be liquidated

Rules and requirements are different for every broker and you should know your broker's requirements. If you are demoing, practice like you want to play. In the real world, nobody with any money management sense would trade the amounts you are talking about.

Just a tip, go for more pips and less lots - you'll become a better trader and you won't destroy your account
  • #19
  • Edited 10:57am Aug 17, 2006 9:17am | Edited 10:57am
stockwet, americanteek, spartan and all the others thanks for your invaluable explanations! I now see that I have been very lucky with my trades this week. My logic was flawed. My interpretation of a margin call was way off. I honestly thought I was covered while risking my whole account on single trades. Deep down I knew those big gains could only be possible if I risked almost all my money.

I was trading with real money. I used this method only three times at news events. I was profitable twice and once I closed the trade with a 0 pip gain.

Even though I almost tripled my account I feel terribly stupid at the moment. I could have lost everything. When I read your posts I felt very uneasy as if I just had blown my account.

The only thing positive about this is that I didn't have to figure this out the hard way!

Thank you so much again. I guess I need a lot more education about the subject. I've been live for about a month and I only have about 2 months experience with the FOREX market.

EDIT:

By the way the broker is FXCM.

Anyway I'll refrain from these potentially suicide trades in the future... LOL!
  • #20
  • Aug 17, 2006 9:21am Aug 17, 2006 9:21am
I hope everyone recognizes, though, that this market allows for ultimate creativity. In other words, who's to say that one way of doing things is the right way for everyone. Just because one person doesn't want to use their margin call as a stop loss doesn't mean everyone should do the same thing. Look at the markets and how they work - there's an ebb and flow to them. Most of the time, you could get into the market at a certain point and it will go 300 or 400 pips against you than come right back and put you into profitability. If you took the scenario I talked about earlier and traded mini lots instead of standard lots, then you could support -640 pips of movement. If you're only going for say, 10 pips, what's the winning percentage on your trades? I'd say it's pretty high. It may seem like a crazy strategy, but I know people who trade similar to this and do quite well - quite well indeed.

So, I'm sure someone will refute this, but, I for one am not going to say that one method of trading or sticking to the conventional set of rules we all hear about is the right way of doing things. What's crazy to one can be entirely logical, appropriate and profitable to another.

Of course, I'm not sure I have the guts to trade this way
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