Confused about position sizes and Account Margin Used

Beginner Questions
1

Hello i just got setup with a live account after demo trading since early November 2017. I started with a minimum deposit of 1000 USD.

Firstly I want to share the first trade I made and why I am super confused about margin and the amount of money put aside by my broker when I make a trade. I followed the babypips position sizing calculator and used a 1% risk.

So i entered GBP/AUD trade on monday @1000 units (the minimum my broker allows) @1.77875. I then put a stop loss around 60-70 pips. I fulfilled the 1% risk rule (babypips calculator said about 800 units i think but min. broker allows was 1000 so i broke rule slightly). Now to my shock it says margin utilized 8.66% and my margin available went down about 100bucks. Why does risking 1% to a trade make my margin available go down by 10%?

Secondly, I suspect that with a deposit of 1000 USD and a minimum order of 1000units I will not be able to trade the daily chart as stop losses are more pips and thus the risk % is higher. I should then only stick to the timeframe that fulfills 1% per trade and minimum 1000units per trade (likely the 1H)?

Any input is appreciated.

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2

Hi @Niconater,

Can you post a screenshot of your open position? Be sure to blot out your account number and any personal information. It’s possible your trade size is not what you think it is.

Either that or it sounds like your margin requirement is approximately 10%. Did you set your maximum leverage to 10:1 or did you keep the default maximum leverage from your broker?

You may find this earlier discussion on leverage interesting as it addresses the distinction between your effective leverage and the maximum leverage available to you in your account. What is the best leverage?

3

I edited post and posted a pic. Here is another one.

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1 Like
4

Thanks @Niconater, can you post a screenshot of the Positions tab?

5

Hi, it should be in the edited post.

6

No @Niconater, what your screenshot shows is the Account tab. Notice how Account is in bold. Tap on the Positions tab and it will display different information.

7

This one?

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8

Thanks @Niconater, that was the info we needed.

We notice you have a Canadian dollar denominated trading account. Is your broker regulated by the Investment Industry Regulatory Organization of Canada (IIROC*)?

If so, then please note that in Canada, the margin requirement for GBP/AUD is 6% which allows you a maximum of 16.7:1 leverage to magnify gains and losses. You can see the Canadian margin requirements for other currency pairs here: http://on.forex.com/2tjUXTa

Taking into account the 6% margin requirement on 1000 GBP (which is 60 GBP) and the current GBP/CAD exchange rate (of about 1.8026[4], then a margin requirement of around 108.16 CAD makes sense.

*One benefit of IIROC regulation is that your funds are insured for up to $1 million by the Canadian Investor Protection Fund.

9

Yes it is backed by IIROC. And how do I figure out how much my trade is leveraged (also what if i dont want to be leveraged)? When making a trade this wasnt an option just units wanted. So essentially the broker takes 108.16 from my account that I cant use to cover my trade?

Thanks in advance.

10

No, your broker set aside 108.16 CAD from your account to cover the minimum margin requirement of 6% for your trade. You need at least that much money in your account to keep the trade open.

Your open position is 1000 GBP and at the time of your screenshot you had 1246.47 CAD in your account. At a GBP/CAD exchange rate of 1.8026[4] your trade has a CAD value of 1802.64

That means your effective leverage is 1.45:1
Please read this post for more info on effective leverage What is the best leverage?

It’s up to you to decide how much of the leverage available to you that you want to use. If you want to trade withough any leverage (i.e. trade with 1:1 leverage), then you must have 1802.64 CAD at the current GBP/CAD rate for every 1000 GBP position you trade.

That’s good. As we have mentioned in previous posts, traders should seek brokers with appropriate regulation for where they live: How can I find a good partner or broker?

11

Ok @Niconater

here are the problems that i see

so… You’ve been trading for 5 months and you are live…WHY ???
this is your first mistake , you should still be on demo

BUT LET’S KEEP GOING

ok… good

and then we have this…

AGAIN…
You Went live and you don’t understand margin
WHY DID YOU GO LIVE ??
do you just have a burning desire to give the broker all your money ?

mate, seriously, get back on demo… ok

You mean 0.01 Lots right ? why are you talking in terms of Units ?

REALLY…???
YOU PLACED A STOP LOSS BETWEEN 60-70 PIPS
HOW EXACTLY DID YOU DO THAT
A Stop loss has to be put at AN EXACT PRICE, how did you get it to cover 10 pips ?

where have you proven that ?
so far i can’t see that you have fulfilled 1% risk

you then said this

slightly ?? hehe
well.
1% x 1,000 = 10
you went to 20

so you risked 2%
and
YOU DID NOT FULFILL THE RULE

let me put this into context for you
if you risk 1% of your account
YOU CAN LOSE 100 TRADES IN A ROW BEFORE YOU BLOW YOUR ACCOUNT
if you risk 2% You can only lose 50 times in a row

you think it’s a small thing… DON’T YOU
you have literally taken away half your chances. it’s not a small thing. it’s very big

then we have this…

hehe
yeah i wonder why ?? hehe

could it perhaps have something to do with the fact that you don’t understand

MARGIN
NOMINAL MARGIN
FREE MARGIN
what do you think hehe

WHAT ???
How can you count down from 1 and get to 10

you then said this…

ok… get a different broker, get one that deals in LOT SIZES
trust me , you’ll thank me