Margin Levels and Margin Calls

Quoting ForexWindo

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margin level = current equity in the account / current amount of margin in use

I've heard that brokers will make margin calls when margin levels are at 50%, sometimes 80%....

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Quoting sanzaru

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Hi Doblece,

Thank you for your explanation.
One more question though. What is the calculation method for 'free margin'?

Thanks.

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Quoting sanzaru

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Ah that makes things clearer. Thank you very much Doblece. And sorry for your trouble.

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Quoting ForexWindo

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I would think that as long as the equity in the account is equal to or greater than the amount required to open the position that the trade could be sustained.

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Quoting roywoods

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Hi,

I have a problem regarding the AccountEquity() value in an MT4 backtest I'm doing.

The Account Balance is $2000
The Base CCY is USD
The TickValue as reported by MT4 is $9.31

I take a short position on USDCHF of 0.01 lots @ 1.70370. Leverage is 500:1 so required margin is only $2.

The price moves against me to 1.82902, that's a move of 0.12532 or 1253.2 pips.

My drawdown calculation is: 1253 (pips) * 9.31 (pip Value) * 0.01 (lots) = $116.67 (a drawdown of $116.67).

However MT4 is reporting that my AccountEquity() is $1928.75....

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Quoting roywoods

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Worked it out. Apologies

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Quoting ForexWindo

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margin level = current equity in the account / current amount of margin in use

I've heard that brokers will make margin calls when margin levels are at 50%, sometimes 80%. I do not understand why this is the case.

I would think that as long as the equity in the account is equal to or greater than the amount required to open the position that the trade could be sustained.

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Quoting meng88

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Margin call is different of course for different brokers, and it's also can be different on the types of accounts. So for small accounts it's bigger (like 60%) and for bigger accounts it's smaller (like 30%). Depends on your deposit. So if you are able to make a huge deposit, broker will think of you as more reliable person. People have already written the whole math about it, so I won't do it again.

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Quoting doblece

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{quote} Balance plus/minus profit/loss = Equity Equity minus used (required) margin = available (or "free") margin

Example: Balance is 10,000 with an
open position of 1 lot
which is losing 20 pips.
Margin required is 1000.
P/L is 20x10 = 200.
Equity is 9800,
and free margin 8800 (equity less margin already in use).
Which gives you a margin level of 980%.

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Quoting roywoods

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Hi, I have a problem regarding the AccountEquity() value in an MT4 backtest I'm doing. The Account Balance is $2000 The Base CCY is USD The TickValue as reported by MT4 is $9.31 I take a short position on USDCHF of 0.01 lots @ 1.70370. Leverage is 500:1 so required margin is only $2. The price moves against me to 1.82902, that's a move of 0.12532 or 1253.2 pips. My drawdown calculation is: 1253 (pips) * 9.31 (pip Value) * 0.01 (lots) = $116.67 (a drawdown of $116.67). However MT4 is reporting that my AccountEquity() is $1928.75. (that's only...

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double     PipValue=0.0001;
int OnInit()
  {
//---
   point=Point;
   if((Digits==3) || (Digits==5))
     {
      point*=10;
     }
   if(Digits==2 || Digits==3) PipValue=PipValue*100;
   if(Digits== 4 || Digits == 5) PipValue = PipValue;
 
 
int OnCalculate(const int rates_total,
                const int prev_calculated,
                const datetime &time[],
                const double &open[],
                const double &high[],
                const double &low[],
                const double &close[],
                const long &tick_volume[],
                const long &volume[],
                const int &spread[])
  {
//---
   string DepositCurrency=AccountInfoString(ACCOUNT_CURRENCY);
   PipValues=(((MarketInfo(Symbol(),MODE_TICKVALUE)*point)/MarketInfo(Symbol(),MODE_TICKSIZE))*LotSize);
//---
   ObjectSetText("Label_Lot_Lev"," Lot/Lev : "+DoubleToStr(LotSize,2)+" /  "+DoubleToStr(leverage,0),10,"Courier New",labelcolor);
   ObjectSetText("Label_PipVal"," Pip Val : "+DoubleToStr(PipValues,3)+" "+DepositCurrency,10,"Courier New",labelcolor);

Quoting DwainUK

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Different brokers offer different margin call and stopout levels. Basically the higher the margin call and stopout level the more safe your account is. At the same time the higher these levels are the less room you have for your trades. The smaller the margin call level the more room you have for your trades but less safer your account is. Lets say one brokers stopout is at 100 % and you have 1000 USD Balance with a trade requiring 200 Margin if it hits the stopout you will be left with 200 USD. If your stopout level is 20 % with 1000 balance and...

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Quoting leebsurag

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{quote} Imo, its not quite correct to talk about safety of trader account in terms of different MC or SO levels. Safe trading is when you always control your risks, trading appropriate lot size and using stop loss. High MC and SO is protection for brokers which protect themselves from liquidity problems. The earlier they close your account in times of low liquidity (in case your position in drawdown) the less are risks for them to get losses.

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