Pips and Leverage....

Nevermind the above question...I got a pretty good answer from "babysteps"

"What the heck is a Margin Call?

In the event that money in your account falls below margin requirements (usable margin), your broker will close some or all open positions. This prevents your account from falling into a negative balance, even in a highly volatile, fast moving market.

Example #1

Let’s say you open a regular Forex account with $2,000 (not a smart idea). You open 1 lot of the EUR/USD, with a margin requirement of $1000. Usable Margin is the money available to open new positions or sustain trading losses. Since you started with $2,000, your usable margin is $2,000. But when you opened 1 lot, which requires a margin requirement of $1,000, your usable margin is now $1,000.

If your losses exceed your usable margin of $1,000 you will get a margin call.

Example #2
Let’s say you open a regular Forex account with $10,000. You open 1 lot of the EUR/USD, with a margin requirement is $1000. Remember, usable margin is the money you have available to open new positions or sustain trading losses. So prior to opening 1 lot, you have a usable margin of $10,000. After you open the trade, you now have $9,000 usable margain and $1,000 of used margin.

If your losses exceed your usable margin of $9,000, you will get a margin call. "

Now, my question is the following: will brokers "protect" you by making sure you do not lose more than 100% of your used margin, or will they "forget" about it, forcing you to end up losing more than 100%, and now you owe them money ?

Thanks...

Now, my question is the following: will brokers "protect" you by making sure you do not lose more than 100% of your used margin, or will they "forget" about it, forcing you to end up losing more than 100%, and now you owe them money ?

Brokers will protect themselves by making sure {to the best of their ability} you do not Lose > 100% of your Equity.
This would require you to Deposit Additional Funds to cover, which they will not expose themselves to the risk of you not doing so.

If you expose $2000 to Margin leaving an additional $2000 Unused Margin, they will automatically Draw on the Unused Portion until it is eaten up. Then they will start closing out your positions {returning Exposed Margin to Unused Margin} for any additional Margin Cover required.

Some do, some don't. From a mechanics perspective, though, it's very hard to go negative in your account. What would have to happen is that you would have to be 1) highly leveraged, 2) losing a lot and getting close to a margin call and 3) before the margin call, the price gaps so big that the next available tick takes out your margin and your remaining equity causing you to go negative. The probability of that happening is pretty tiny.

Got it....thanks


Future

Excellent reading in this thread. Margin and leverage is something I still struggle with for some reason. My brain for whatever reason just goes haywire .

So is this correct with a broker using 100 to 1? I'm going to open a micro account with $1,000.

1% of $10,000 = $10.00

For example I have a 25 pip stop

25 pips = $10.00
1 pip = .40

This next part confuses me.

My trade would be adjusted so that I risk $.40 a pip. With 20:1 leverage my trade size is $8.00.

What does trade size mean? Is that how many lots I can take out? I could take out a max of 80 mirco lots?

First off 1% of $10k is $100, not $10.

Second, %R MM operates by multiplying you ACTUAL account balance by 1%. So your maximum risk should be $1000 * 1% = $10. You have the rest of it right...

$10 / 25 pips = .40 per pip. Regardless of your leverage you need to play with your trade size until it matches the .40 per pip.

Hi

I am not going to answer to your question as I am still learning this stuff and the last thing you need is more confusion coming from me.

However I do feel better knowing that you also are trying to learn this very good, meaning I am not completely dumb

I am telling you, at first it is all very, very confusing. Thanks to everybody who answered to this thread, I am now starting to make sense of it.

I am glad you enjoyed reading this thread. As I told the other guys, they are not only helping me, but they are helping all the other people who have my same questions.

This forum is full of helpful people, and the reason is that in here no one has any agenda. When you visit stocks forums you don't know who to trust 'cause they could be pumpers, bashers/shorters etc.

Here, we all fight the same "enemy," such has banks and big corporations, therefore nobody has any personal interest except the fact of learning and teaching what they have learned.

I love it.

What I've learned so far is that SIDUS's system works wonders for me.

With a demo account of $50,000 I am now up to $9000 trading mostly 100k or 400k lots at a time. It took me a little over 10 days to do so.

Obviously my approach is a little bit more risky and I am working at making it safer.

What I do know by now is that with this market once you are sure about a trade and you place it, you have to close the computer and trust your gut feeling because between the opening and closing of the trade, it can get nasty and if you keep looking at the screen you can get a heart attack.

I give my trades around 5-6 hours to do their thing, and most of the times they do good (so far).

Looking at your trades too much, especially right after you place them, will force you to sell for a loss.

If the chart and your system tell you it is the right time, and especially if you are using a long term chart, you have to place the trade and give it time to mature.

Right now I am finding my best opportunities right before going to bed (miami time). I place the trade, go to sleep and wake up with a profit.

Now, I really do not know if I will ever have the balls to do such thing with real money, but a stop loss would definitely help in that case....

All I can tell you is that I am considering this demo account as real as possible, since I know that each loss I take is at least a week longer that I have to wait before going live. When I do see some losses, I feel as if someone as punched me in the stomach, 'cause it hurts.

That's how everybody should feel with demos I think. It is not real money in that moment, but it is money you are not making for having to wait more to go live....


Future

Thanks Dark it's much easier for me to understand now. .40 a pip, looks like I'm going to have to tell my wife to post pone our plans of the yacht and house on the beach for a little bit. jk.