I need some help calculating a margin call with the following information:
[B]Account size:[/B] 5000 USD.
[B]Leverage:[/B] 400:1
[B]Opened mini lots:[/B] 27 (10,000 units each = aprox 1 dollar / pip)
=))
[B]Spread:[/B] 3 pips
[B]Stop loss:[/B] 100 pips for each mini lot
Now my guess is that initially when the 27 lots are opened:
[B]Equity [/B]will go down from 5000 to 4919 for the 81 dollars of the spreads.
[B]Used margin[/B] will be 756.00 (270,000 units x .0025 because of leverage + 81 dollars of spread)
If the 27 opened lots hit a [B]stop loss[/B] of 100 pips my equity will go down from 4919 to 2219 (4919-2700 of 27 lots of 1 dollar per pip x 100 pips lost)
Now if my equity is 2219 and my used margin remains 872, there should not be a margin call. Is this correct?
based on the senario you have shown, you will not recieve a margin call. However you will have lost over 50% of your account in a single trade, which is crazy.
I hope you don’t mind but I’m going to use your thread to post a comment on something that’s been worrying me quite a lot of late.
Before I post: please note that comment is not PARTICULARY directed at you (I have no idea how long you’ve been trading or what your current level of expertise is).
Now: I’ve noticed of late that there are an increasing number of posts on this and other forums where the subject of margin calls is being discussed. It concerns me. The bottom line is this: if a trader is concerned that he may get margin called he is, very simply, overtrading his account and has no clue how to manage risk. The end result will always be the same.
I’ve noted this before (and oddly enough: I noticed that somebody in ‘Floored - The Movie’ vocalised this as well much to my delight): it’s not how much you make in this business but how little you lose that will keep you in this business. Translated: RISK MANAGEMENT!!!
Using your figures Dreadart (I’m not trying to single you out but you provide a good example): you’re looking at a potential loss of just short of 56% on ONE trade or $2 781. As per the generally accepted rule of not ever risking more than 2% of your account on any one single trade: your maximum potential loss should not exceed $100!!! See the problem here??? I hope for your sake this is not real money we’re talking about here. True: if you’re only risking 2% of your account then your earning potential is limited and this is why, even the BabyPips School notes, that the number one cause of failure in this business is being undercapitalised. Being undercapitalised encourages overtrading i.e. it’s real hard to have $5 000 in an account and accept that if you make just $500 in a single month (on average) then you’re doing REALLY well and far better than most. One would expect the amount of money to be made out of $5 000 to be far more not so??? Unfortuanately: this is not the case.
Sorry: I know this post is not what you’re looking for but it’s something I feel strongly about. I learned the hard way a long time ago and there’s no reason for others to have to learn that way.
Thank you for the replies. I am not planning to open a trade with 27 mini lots and put on stake 56% of my account. I never risk more than 1% on a single trade or 5% between all of my opened positions. I usually scalp for 5-10 pips with a daily target profit of 20 pips a day and my SL’s never go above 10 pips.
Fortunately I am profitable on this, my third account. It took me margin calling 2 accounts a couple of years ago to learn my lesson.
I have been learning what I know with a friend. We both started our accounts at the same time. My friend is considering buffing up his account from 1,500 to 5000 so that he can subscribe to an alert service and open 9 different trades (Different pairs) a week with 3 lots each. We were discussing if 5000 dollars were enough for this move he is trying to bust.
Personally I rather increase my account size with my mini scalps than subscribing to a 300 dollars / month service. 300 dollars a month would equal about 30 free trades for me and a nice learning experience. I was not sure 100% sure about this problem since I really never need such a high leverage since I never risk a lot on my positions.
Thanks again for the insight!
And by the way. Ill kiss my account every morning but never to say goodbye
