i`ve been reading through the school of pipsology about margin calls and have found two statements which contradict themselves,one says
As long as your Equity is greater than your Used Margin, you will not have Margin Call.
( Equity > Used Margin ) = NO MARGIN CALL
and the other says
What the heck is a Margin Call?
In the event that money in your account falls below margin requirements (usable margin), your broker will close some or all open positions. This prevents your account from falling into a negative balance, even in a highly volatile, fast moving market.
please can somebody tell me which is the correct statement
They both are. They just say the same thing in different terms.
What it boils down to is this: Your net account equity (cash balance minus any open position losses) must exceed the margin requirement for the position(s) you hold. Otherwise you get a margin call.
I still don’t understand. If usable margin is not the same as used margin then which is right? I even checked the Oanda calculators and I’m even more confused. Here is what I got from Oanda for a $1,000 account, 10,000 units for GBP/JPY:
If I’m using $1,000 and 411.21 is used margin leaving $588.79 as usable margin then why don’t I get margin called at $989. If usable margin = equity - used margin, the equity being $1,000, used being $411.21 and usable being $588.79 then the margin call should be hit at $989, “In the event that money in your account falls below margin requirements (usable margin), your broker will close some or all open positions.” Am I reading this wrong? Thanks
"Anything worth a damn requires hard work. If it doesn’t require hard work it’s not worth a damn."
Gator
"When you think every move you make is wrong, you make the wrong move."
Gator
Used margin is what is locked up in your trade(s).
Usable margin is Initial Balance minus Used Margin +/- the Profit/Loss on your open position(s).
I believe Oanda will give you a margin call when you current equity (balance +/- the open profit/loss) falls below half your required margin.
So if you start with $1000 and put on a position requiring a $400 margin, you would not get a margin call until the position lost at least $800 ($1000 - $800 = $200 = $400/2).
Since I’m new as well let see if I can clarify it for you. The simplest ways to know when you are going to get a margin call is to read your usable margin and your net equity…your balance in your account and if your usable margin balance is lower from your equity balance, you will most likely get a margin call. Before your trade if you check those number, you will be able to tell if you are close to having a margin call.
Not to be prick or anything, but…Why do people continue to post on this thread. It’s not that hard spend at least 15 min on the school… it gives you a nice graphic to figure it out. If you can’t figure it out after 15 min then you have no business trading 4x. I mean really, many people can profit from the forex with enough education and practice, but some are not destined too. Why do you think 90% fail ???