[dpaterso]

Actually John - this kept me awake until the 'wee' hours this morning. Maybe it's not such 'ridiculous' idea after all.

Let me put it this way (OK - it's not the same as relying on a margin call to get stopped out BUT it did get me to thinking):

Let's say that you had $5000 in your account. The 'rules' state that you should not risk more than 1% - 2% of your account balance on any single trade (and this is where some people 'get it wrong' - myself included - a while back anyway) i.e. if the trade goes against you then (based on 2% let's say) you would only lose $100 (assuming that you have 'laid out' or used the entire $5000 to purchase an instrument). This IS NOT the same as only USING 1% or 2% of your capital to trade with i.e. on a $5000 account you would only be trading with $100 (2% for example) at any given time and believe you me you would take a lifetime and then some to make even a reasonable profit. I know this is 'old hat' to you but I do know for a fact that there are still people out there who don't 'get this right'!!!

Anwyay - I digress.

Back to the 'ridiculous' idea:

Let's say that you had $5000. Instead of buying say one lot of EUR/USD for example for $50 and setting your stop so that the most you would lose (2% rule) would be $100 which would mean that EUR/USD would have to move 100 pips against you before getting stopped out (I'm using my GCI account as an example i.e. $50 per lot mimum and 200:1 leverage) you 'adjust' the lot size to the point where you are using the maximum capital available to you on the trade and, after taking into account your 2% 'risk rule' you place a stop that will close the trade within a few points of a margin call. I dont' know if that makes sense. What I'm trying to get at is that there is no reason to NOT margin as much of your account as you can on a trade just as long as your 2% 'risk rule' (or 5% which is probably more what I have come to 'stick with') is met. In other words - using the above figures as an example - let's say that you opened a position with $2500 EUR/USD but you're only prepared to lose 5% if the trade goes against you. Your potential loss is therefore $250 BUT you have now used $2500 for the lot so what this means is that EUR/USD has 'room to move' of 5 pips before getting stopped out but you have used 50% of your capital on this trade. In other words by varying the lot size as a ratio to the amount of capital being 'laid out' you are then effectively altering the number of pips that the trade can go against you BUT the potential profits are enormous if it goes in your favour.

Actually - now that I'm typing this and reading it back - it's starting to NOT make sense to me - but I'm leaving it here - I'll come back to it - I know there is something there (here) - I'm just not being able to put it correctly into words right now.