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Old 11-10-2008, 03:31 PM   #10 (permalink)
David Waring
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Hey pkevl,

Sounds good but that is what I am trying to explain, what determines how aggressively or conservatively you are trading is the size of position you trade relative to the amount of money you have in your account, not the minimum margin requirement.

To help understand this lets take two examples.

Trader 1:

Minimum margin requirement 200 to 1

Account Equity: $10,000

Open Position Size: $20,000

Leverage: 2 to 1

Trader 2:

Minimum Margin Requirement 20 to 1

Account Equity: $5000

Open Position Size $20,000

Leverage 4 to 1


So, as you can see from this example, even though trader 1 has a much lower minimum margin requirement, he is trading much more conservatively than trader 2 who has a higher minimum margin requirement. So you can see here that how conservative or aggressive you are with your account is a factor of how much money you have in your account vs. the position size that you trade not the minimum margin requirement. With this in mind you don't need to change your minimum margin requirement. To trade more conservatively simply adjust your position size.

Hope that helps.

Best Regards,
Dave
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Disclaimer: Trading is risky and can result in substantial financial loss. As always my posts are simply one traders opinion and should not be taken as trading advice. I am not a financial adviser so everyone please do their own analysis and take responsibility for their own trades.
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