Micro-lots and leverage

Hi so i have question about micro-lots and leverage. I have seen at fxcm that you can start $50 micro account and that they offer small 1k lot. So does this mean that minimum lot is micro-lot that is 1000 units of base currency? So with $50 you must use at least 20:1 leverage to but micro lot? Also if a use leverage on $50 if positions moves against me 1 pip i would get a margin call because i dont have enough funds to but 1 micro lot? But if i had lets say $100 and use leverage on $50 of 20:1 i would not get a margin call because i have enough funds to have micro lot position open? Am i right? Thank You

If the smallest they offer is micro lots, choose another broker such as Oanda or IBFX. They have no minimum deposit to start the account and they allow you to trade as low as nano lots (100) with IBFX and Oanda you can do any lot size meaning you could trade (1) unit if you wanted to.

Review this thread, its short and it has a lot more details in it for you. 301 Moved Permanently

Correct.

Exactly right. If you buy 1 micro lot of a pair such as USD/JPY, or USD/CHF, or any other pair having the USD as the base currency, then you would be using exactly 20:1 actual leverage. Your position size would be $1,000. And required margin would be $20 (that is, 2% of your position size).

If you buy 1 micro lot of a pair such as EUR/USD, in which the USD is the cross-currency AND the current price is greater than 1.0000, then you would be using MORE than 20:1 actual leverage. Your position size would be 1,000 units of base currency (not USD) with a total value greater than $1,000. And required margin would be more than $20.

I’m not sure what this question means. Maybe a couple of examples will help.

First example. You have a $50 account balance, 50:1 maximum allowable leverage (which means 2% required margin on every trade), and you open a 1-micro-lot position in EUR/USD. In this example, your position size is $1,000, so $20 of your account balance will be designated as margin, and you will have $30 available to cover the spread plus any loss that might occur. Altogether, $30 will cover 300 pips of loss, at $0.10 per pip for micro-lots.

Second example. Let’s say you open a 2-micro-lot position (which would be very risky). In this case, your position size is $2,000, so $40 of your account balance will be designated as margin, leaving only $10 available to cover 2 spreads + losses on 2 micro lots. Altogether, $10 will cover 100 pips of loss. If the spread is, say 3 pips per lot, and if the price moved against you by more than 47 pips, then you would face a margin-call. Make sure that you understand how that was calculated.

I hope that answers your questions.

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Thanks i haven’t known about this. This means that o would be using more then 20:1 leverage because (for example) on EUR/USD trade eur is base currency and since micro lot is 1000 units of base currency(in this case EUR), 1000 Euros is more then 1000 USD and thus more leverage. Am i correct?

I asked that question before, because i didn’t know that margin and loss cushion(in first example $20 margin and $30 loss cushion) is taken from $50 and not from additional funds.

Now if i had with my broker $100 and wanted to use only $50 for trading and other $50 just to sit there in account and not to be used for anything, can i chose that with my broker?

Thank you very much!:cool:

Yes. If you open a 1-micro-lot position in the EUR/USD, your position size is 1,000 euro, which is worth about $1,395 (at the current exchange rate).

In this case, your position is $1,395, your account balance is $50, and you are using actual leverage of 1,395 / 50 = 27.9 : 1. Rounding this number UP, [B]you are using 28:1 actual leverage.[/B]

I have never heard of this.

You cannot deposit $100 in a forex account, and then tell your broker that only $50 of your money can be used for margin, for spreads, and to cover losses, regardless of how you manage (or mis-manage) your positions, and no matter what happens in the market.

If you do something (or if the market does something) that requires some, or all, of your second $50, your broker is going to use that portion of your funds.

The only way to protect a sum of money from a catastrophic loss in your trading account is to [B]keep that money OUT of your account.[/B]