My broker has a 50% stop-out system. Do all brokers have this safety system to prevent losses? And is the stop-out percentage different for each broker?
Yes, they vary.
No.
Some have “negative balance protection,” some don’t.
Like almost everything else to do with forex brokers, in practice it depends mostly (not entirely) on how, where and by whom your account is regulated.
They all have some sort of “margin call” level.
But those don’t always work. Sometimes the broker can’t honor your stop-loss in a fast-moving market. But that risk only arises for people who trade the news, I think.
All of this stuff isn’t relevant to any normal retail forex trader, Miguel.
In practice, it’s only ever a problem if you do really dangerous things like trading the news, using very high leverage, or basically trying somehow to “exploit the system”, rather than normal trading.
Of course. It’s called “margin stop”. When your equity becomes =< X% of the taken margin they start closing your losing positions, from the largest one. At my broker it’s also 50%. At some offshore brokers (high leverage) this can be much lower, like 20%. Margin call is simply a notification that you passed a certain barrier and should be careful. Usually it’s at 100%.
Hahaha that was exactly what I did, I created a bot that bought or sold on each candle without a stop loss with a take profit of 3 pips, I earned 3 pips at 0.01 lots every two minutes but the balance increased constantly but when the margin level reached 50% the stop out was triggered and only closed operations with a lot of loss and started again from scratch. It is a price action strategy. Is there any way for this strategy to be profitable?
Hahaha that was exactly what I did, I created a bot that bought or sold on each candle without a stop loss with a take profit of 3 pips, I earned 3 pips at 0.01 lots every two minutes but the balance increased constantly but when the margin level reached 50% the stop out was triggered and only closed operations with a lot of loss and started again from scratch. It is a price action strategy. Is there any way for this strategy to be profitable??
It isn’t. It’s crazy nonsense.
What do you think?
If you were a counterparty “broker”, would you let people do that, long-term, and pay them out of your takings?
That was what you need to know, Miguel.
Forex Counterparty
A counterparty is any other party who participates in a financial transaction. Every transaction must have a counterparty for the deal to become completed. Buyers need pairing with sellers, and vice versa.
Counterparties can be individuals, businesses, governments, or any other organization.
What is counterparty risk?
Counterparty risk is the risk that the other side of the trade cannot fulfill its obligation under the terms of the transaction and default on the contractual agreement. Counterparty risk can exist in credit, investment, and trading transactions.
In some financial transactions, the counterparty is unknown. In these cases, counterparty risk is managed through clearing firms.
Examples of counterparty risk can include a vendor not providing a good or service after payment. There are also risks that one party will back out of the deal before the transaction completes but after the initial agreement.
Forex - Foreign Currency Transactions SEC.GOV
- In the off-exchange market. In the off-exchange market (sometimes called the over-the-counter, or OTC, market), an individual investor trades directly with a counterparty, such as a forex broker or dealer; there is no exchange or central clearinghouse. Instead, the trading generally is conducted by telephone or through electronic communications networks (ECNs). In this case, the investor relies entirely on the counterparty to receive funds or to be able to trade out of a position.
How do Brokers and Liquidity Providers Work Together?
There are two key players you can’t bypass in the foreign exchange (FX) market, the liquidity providers and brokers. These parties’ collaboration ensures a liquid and efficient FX market for traders.
Liquidity providers ensure that the market has tradable currency pairs and provide pricing information. While brokers link traders to liquidity providers and execute trades on behalf of the traders.
In this blog post, we’ll shed more light on how these parties work together to ease trading and provide you with a deeper understanding of the interplay between these parties and the impact it has on trading activities.