Forex is a market that operates with leverage. So if a trader on a leverage of 1: Leverage came about because it takes a lot of money to control positions in the forex market. Currency movements are very tiny a value of 0. Most traders do not have these large sums to invest, so leverage was designed so as to create a ready pool of funds for traders to finance their forex trades. However, leverage brought with it an unwanted effect: If all positions are in debit, they will all be closed.
The different brokers have various takes on what constitutes their stop out level. Many traders rush through account opening and never bother to check, either out of ignorance or just plain carelessness.
It is for such traders that the following explanation is made. This means that the stop out level is the point at which a margin call will be issued. No advance warnings are given. Once the equity dips to stop out level, all positions are closed. If nothing is done and equity drops to stop out level, all positions are closed. The percentages used are for educational purposes; look at the trading conditions in your account opening agreement to get the actual figures.
Featured October 2, , November 30, , Featured November 23, , August 5, , July 9, , June 25, , Forex Tips Forex Walkthrough. Featured July 17, , 8: July 7, , July 4, , 8: June 30, , 8: By Forex4you on October 11, , 9: More orders means equity is used up to sustain a trade, leaving less equity as free margin to prevent margin calls.
Use stop losses to control losses before they get out of hand. If a trade is hopelessly unprofitable, by all means close it. Better to close it while you still have money in your account than for the broker to do it for you and leave your account with nothing.
Many traders know nothing about hedging. You cannot survive long without using a technique that professionals use to cover their losses. Everyone will lose money at some point. If you have been issued an advance notice i.
Proper trade management is the best way to prevent stop outs. May 19, , 9: Thank you Your feedback has been received.More...