I entered a trade in the USDJPY and I want to open another trade in USDCAD but I have little free margin left. My question is, if I open up another trade will my first trade close out due to the little free margin I have left?
No.
You wonât be able to open an additional (third) trade if you donât have enough margin for it.
Your position-sizing must be hugely inappropriate to your account-size, for this to be an issue for you.
You should never have more than a total of 1% of your account-funds at risk, at any time.
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Little margin left, this is main reason why most people lose money in Forex. [quote=âLaughingCharlie, post:2, topic:147525â]
You should never have more than a total of 1% of your account-funds at risk, at any time.
[/quote]
I absolutely agree! 1% would be an understatement.
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No - either youâve got enough margin to open another position, or you havenât. If you have, nothing will âclose outâ, and if you havenât, it wonât open.
Whatâs your total risk-exposure, as a percentage of your total account value? (In other words, if both your current trades suddenly go bad and both hit their stop-losses, what proportion of your total account will that lose?). If that figureâs more than 1% (or 2% if youâre feeling very bold), then your problem is one of lack of understanding of position-sizing.
Are you trading on demo, or with actual money?
USD/JPY and USD/CAD are correlated positions, because theyâre both dependent on the value of the USD, so what youâre doing is extra risky (unless youâre long on one and short on the other, but I donât think you meant that?).
If you donât want to close your current trade and want to open another one but you donât have enough margin you can hedge the running trade by opening the opposite direction of the same pair (USDJPY in your case). This will free you margin from that pair, which you can use to open a trade on another pair. Basically if you 100% hedge your current trade no margin will be required for that pair (for example 0,25 Sell USDJPY and 0,25 Buy USDJPY = 0 Margin required). Hedging will lock for you the current PnL from the running trade because from the moment of entering into hedge any further movement of the price of that pair will generate profit on the one trade and the same amount of loss on the other. However, you will have to pay what your brokers request for opening of trade â commission or marked up spread.
I risk 3% on each of all trades while using my actual money
To be fair using 3% isnât out of the question, as a retail trader, who is expierenced enough to understand the consequences.
I can also see why youâd run out of avalible margin too. The below calc shows this on a 30-1 leveraged account (which will be the maximum leverage allowed in Europe anyway on any leveraged account).
Assuming you use a 25pip stop with a 2pip target spread, youâd have over 50% of your margin tied up. So yes, it doesnât take much to maximise you avalible margin when using 3% per âbetâ.
**example assuming we trade a XXX/USD pair
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