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Old 11-10-2008, 03:42 PM   #11 (permalink)
 
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Got it...finally. Thanks a lot.

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Old 11-10-2008, 03:44 PM   #12 (permalink)
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Anytime. I think you will find although there are not a lot of other questions on this subject, this is because most people don't really understand what we just covered and not because it is simple to understand. I would say this subject and rollover are probably the most difficult logistics of fx trading concepts to grasp.

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Dave
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Old 11-11-2008, 04:32 AM   #13 (permalink)
 
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Hi, if you have taken a 10k position and leverage is 200:1 and you only need $50 to uphold this position, what happens if i don´t put in a stop loss and market drops with 50pips, will i have a margin call then(my account size is $10000?.


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Old 11-11-2008, 10:42 AM   #14 (permalink)
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Hi Christian,

Glad to hear from you.

If you have $10,000 in your account an 1 10K position on then your used margin is going to be $50 and your usable margin is going to be $9,950. If the market then drops 50 pips and we assume that the value of a 1 pip move in the currency pair you are trading is $1, then your account equity is going to drop to $9,950 your used margin stays at $50 and your usable margin drops to $9,900.

So in other words under this scenario you would still be able to lose $9,900 before you received a margin call.

Hope that helps.

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Dave
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Old 12-04-2008, 07:52 AM   #15 (permalink)
 
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Quote:
Originally Posted by David Waring View Post
Once you do this you should see the amount in the Usd Margin column at $1000. If you remember from our previous lessons we are trading a contract size of 100,000 of the base currency, which puts the leverage which has been extended to us on this particular demo account at exactly 100 to 1 for currency pairs in which the US Dollar is the base currency and somewhere near 100 to 1 for currency pairs in which it is not.
Hi Dave

I'm a little confused again.

If you buy 1 contract of EUR/USD, you actually bought 100,000 Euros
or
$159,150

Since leverage = 100:1
Used margin = $159150 / 100
= $1591 rather than $1000
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Old 12-04-2008, 10:13 AM   #16 (permalink)
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Hi Prolog,

Yes you are correct here. The leverage is really simply $1000 per 100,000 units of the base currency. So when the USD is the base currency then the leverage is exactly 100 to 1 but when it is not it is slightly different as the in the example you have pointed out because the required margin does not increase or decrease it remains $1000. To make things simple I guess people just say 100 to 1.

Hope that helps.

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Dave
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Old 04-11-2009, 12:27 AM   #17 (permalink)
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Leverage and account balance


Hi David,
Congratulations in the website and the brilliant videos. Iím still trying to get my head around what I can expect in terms of leverage on my account. I am in the process of opening a standard account with FXCM and opening it with $US20,000.

Having watched your videos I now understand it better, in that the leverage is something whch the trading platform automatically sets based on your account balance? It is up to you the trader to adjust it to suit your risk acceptance level. I think thatís right. My trading will probably always be Short time frames, Iím not one for long term plans and prefer to see short term activity. If I was to trade just one lot, am I correct in thinking I am buying :

1Standard lot = $100,000 which equates to a leverage of 5:1, based on my opening balance of $20,000 Thus allowing me to trade at this level. On a trade if my trade gained 25 pips, I would gain $250, and loss would be calculated In the same manner. At a leverage of 5:1, itís about on the limit to which I am prepared to operate my risk level at, not wanting to go higher. With Short term trading probably I have a bit more options in terms of leverage than if I was trading longer time frames.
If I increase the number of lots to 2 lots, I am trading 2 x $100,000 = $200,000 at a leverage of 10:1 which I would not do. Thus to maintain a 5:1 ratio I need to get my account balance to $40,000. Would this be correct, or have I really missed the point and got this wrong.
Thanks for your services here, you have a great website.
BJ, (Sydney, Australia)
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Old 04-11-2009, 12:54 AM   #18 (permalink)
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Hi BJ

It sounds like you have a pretty good handle on it. Just remember that leverage isn't something that is set; it is simply the ratio of how much you buy (or sell) verses the cash balance in your account.

By going with a full size account with $20K, in my opinion, you are limiting yourself. To follow proper risk management would mean you probably could only buy 1 lot at a time without over leveraging yourself.
If you went with a mini instead of a standard ($1 per pip instead of $10), it would give you some flexibility on position sizing.

Also, on some pairs, 25 pips is a pretty close stop.

Everything you wrote here is correct-
"1Standard lot = $100,000 which equates to a leverage of 5:1, based on my opening balance of $20,000. On a trade if my trade gained 25 pips, I would gain $250, and loss would be calculated In the same manner.
If I increase the number of lots to 2 lots, I am trading 2 x $100,000 = $200,000 at a leverage of 10:1. Thus to maintain a 5:1 ratio I need to get my account balance to $40,000."


Cheers
Tek
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Old 07-13-2009, 11:41 PM   #19 (permalink)
 
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Still,


Hi, Dave,
I am stil new, and just finished your Mod 1 - Mod 8 in your FX beginner course. I initially read other materials in Japanese (Japanese FX over there), which seems to get me more confused.. I apologize in advance my English mistakes.

I understand that Trader1 is more conservative than Trader2.
Questions:
(1) How do we calculate to get the min. margin requirement
(here it says 200-1 ) for Trade1, and
the min. margin requirement (20-1) for Trader2 ?

After that, using 200-1 and 20-1,
(2) For Trader1, the minimum margin requiremnet (it means, if below, it becomes Margin Call) is $100 (20,000 /200) ?

For Trader2, the minimum margin requirement is $1000 (20,000/20) ?


**** If I am already wrong in (2), pls ignore my question (3) & (4).***

3) But when your base currency is USD, your position is in another currency (for example, EUD), how do I use the above (2) information for the EUD?

How can I reflect these number ($100, or $1000) on the sell price, while you're looking at the sell/buy chart,
deciding when you must to exit to avoid Margin Call?

(4) With A amount in your equity, and the B amount of Leverage, and the C amount of minimum margin requirement, is there is a way/formula to calculate, the X amount (pip) of fall from your original (bought) price,
which will lead to Margin Call?

Thank you.
I hope I am not too off..
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Old 08-26-2009, 11:06 AM   #20 (permalink)
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Im having trouble closing out my positions. I click on the dollar amt under the close column and also tried by clicking on the ticket number.
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