Indeed, they have to calculate the position size according to the the risk and the stop loss size. Margin and leverage are two important terms that are usually hard for the forex traders to understand. It is very important to understand the meaning and the importance of margin, the way it has to be calculated, and the role of leverage in margin. It helps the traders to trade the larger amounts of securities through having a smaller account balance.
When you set the volume to 0. When you have no open positions, your account balance is the amount of the money you have in your account. As long as you have no positions, your account equity and free margin are the same as your account balance. Brokers use it to determine whether the traders can take any new positions when they already have some positions.
As a result, when your account equity equals the margin, you will not be able to take any new positions anymore. The reason is that the broker cannot allow you to lose more than the money you have deposited in your account. The market can keep on going against you forever and you lose all the money you have in your account and then get a negative balance if nobody closes your losing positions.
Then the market reaches where one of your pending orders are placed while you have no enough free margin in your account. But the the truth is that the pending orders could not be triggered or were cancelled because there was no enough free margin in the account. You have to have free money in your account to take a new position.
There is a margin check that tests for what the MT4 account margin level will be after the trade is open. It means that the bridge will calculate what the used margin will be in the MT4 account after the new trade opens. The terminal will be opened and it shows your account balance, equity, margin, free margin and margin level.
You may need to read the above explanations for a few times to completely digest the terms I explained. Is the bonus you receive from the broker to become able to trade large amounts with having a small amount of money in your account. When the leverage is Free margin is the money that is not engaged in any trade and you can use it to take more positions. If your open positions make money, the more they go to profit, the greater equity you will have, and so you will have more free margin. Is the level that if your margin level goes below, you will not be able to take any new positions.
While having losing positions, your margin level goes down and becomes close to the margin call level. Is the level that if your margin level goes below, the system starts closing your losing positions.
Then if your other losing positions keep on losing and the margin level goes below the stop out level again, the system closes another losing position which is the biggest open losing position. I was surching for some helpfull material to understand term.
I found that this artical is very helpful and easy to understand for me. Can you please let me know how to calculate this for a account currency is Euro. How can i calculate margin here ratio is Really there is lot of information and have easy way to understand. I think this is best where is lot of knowledge and better site. I am currently trading with a broker who leverage 1: I also have tried to contact him many times but get no feedback, however I still receive daily reports from him.
Lately he has lost a lot of trades which worries me. Your advice would be appreciated. What if I start a trade risking the whole account with balance equals equity equals margin right at the very beginning?
So no free margin available. This is a suicidal strategy for an idiot: And that is not to mention the false price spikes they cause to liquidate clients, stop hunting, and numerous other methods to steal your money, just like the lying Jews in the Temple, whom Jesus chased into the dirt.
The situation right now, the buying position equal the selling position and my account is on Margin Call. I need your advise what I should do? And how can I keep my account alive? Your prompt advise is appreciated, cause I have one weak to act otherwise my account will be wiped out. You mean you have hedged and you have taken a long and a short position of the same currency pair at the same time? Not Hedging, what happened the positions I had reached a losses nearly equal my balance, the system made new positions equal the opened ones which makes the Equity and free Margin almost zero instead of closing positions one by one as you said.
This is really strange, because how the system can take new positions while your losing position equals your account balance? There was no free margin in your account for taking any new position. I think you have nothing to lose now if you hold your positions. If you close, you will lose all you have in your balance. However, if you hold, then chances are the price turns around and you get out of this trap.
If the price keeps on going against you, then you will lose no more than your balance which is already lost indeed. Can somebody tell me how to get the margin coverage with the information they give me? Which of the following is false? If the free margin is , The price is not the good one. All I have to say is thank you. Could you please explain what volume set to 0.
Thanks for your wonderful guide. I feel that I came to correct path after know you in LuckScout. Hopefully to go long journey with your brilliant way. I have question, regarding Margin. Like you said margin is based on leverage calculation.
My balance is I am computing it but my computation gives me a margin of I am quite confuse how you do it. Hope you can help me out with this. To have a 0. Oops my computation is still wrong, but still why is my account not reflecting the true computation. Thank you so much Chris. To have just a 0. Hi Chris, Thanks for wonderful article. I have referred this article to many people who have just stepped in. Thank you Chris for that you are! My english is very low, so I need to translate all articles with google dictionary and with my knowlagde about english.
Thank you for your knowledge and time. I follow LuckScout everyday. Have a nice day Regards BeQuiet from Poland. Hey Chris, what usualy is bigger in a proffesional trader account, the balance or the equity? And last, how mt4 decide which trade to close in that case, thank you. I learned a lot now. I never imagined a profit which is much bigger more than double from the account balance. They are used to hold their positions for a long time and many of their positions go to profit a lot.
Therefore, the profit is sometimes higher than the balance, but please note that it happens after a long time, not within a week or a few months. Thank you for your lessons. But I confused about one thing.
Let say I decide to open an account and choose to use 1: To make it simple, lets say I deposit and buy 0. Then my account will look like this: Also, my Equity will be equal to my Margin right from the start. And, if the trade is floating minus, isnt it means that I can get stop out? This is really confusing. I hope I dont make you confuse and you get my point. When you get margin call, you will not be able to take any new positions, but your positions will not be closed.
Usually the stop out level is set in the way that your position will not be closed as long as you have money in your account.
This is not true: Please explain this properly to retail speculators who know nothing about how MMs automatically liquidate positions in Metatrader from their initial trade. This is priceless , I did found it very difficult to understand Margin even insta failed to make me understand it. Is it gonna be gone too or the broker will release it back to my account?More...