Margin question

Hi all,

Probably a really basic question but here goes .

Say I have an Account balance of $1000 .

I place a 0.2 mini lot trade on GBP/NZD with margin of around $72 on meta trader.

What would be my potential losses if the trade goes against me? How far would the market need to move in pips for me to take a loss?
Like say if i think the market will eventually go the way I expected, do I have a limit on how long I can hold the trade given how much I have in the account?

Would I get a a margin call? And if so, how much would the broker take? Would I loose just the $72 margin? Or could I loose more?

Thank you in advance!


I think you mean 6 really basic questions :rofl:

Let’s take them in order.

In normal trading, your potential loss has nothing to do with your account balance, or the margin required in order to open your trade.

Account balance and margin would come into play only in the extreme case of a margin call, which we will discuss in a moment.

Actually, you will begin with a loss (of a pip, or a few pips), due to the BID/ASK spread. Then, any price movement opposite the direction of your position will add to your loss.

No, you can hold a trade indefinitely, provided your free margin ($922.73 in the graphic you posted) is not reduced to zero by losses (due to adverse price movement), by withdrawals (made by you), or by negative swap (a daily charge which accounts for the difference in interest rates between the base currency and quote currency in the pair you are trading).

The metrics of your trade are not unreasonable. You are trading 2,000 units of GBP/NZD (worth $2,537 at the current GBP/USD price) in an account with a $1,000 balance. So, you are using 2.54:1 actual leverage, which is very conservative. If you make no other trades, and simply let this trade run, the likelihood is remote that losses or swaps will ever consume your $922.73 in free margin (even if you let this trade run at a loss for years).

A margin call will occur only if all of your free margin is consumed, leaving only the maintenance margin (or a portion of it, depending on your broker’s terms and conditions) in the account. If that were to happen (very unlikely), then you would suffer a forced liquidation (in lieu of an actual “margin call” in the classic sense), and your position would be closed. This would preserve a remnant of your original account, keeping your account open, and saving you from owing your broker additional money.

When a forced liquidation (popularly referred to as a “margin call”) occurs, your broker doesn’t take any of your money – the market has already done that. You have lost all of your account except the maintenance margin, which your broker returns to you, after the forced liquidation.

Margin is the portion of your account that you cannot lose, under normal circumstances. What are abnormal circumstances? – Something like a so-called “black swan” event, where market conditions become so disorderly that liquidity dries up, stop-losses are overrun, brokers are unable to quote prices, and traders are unable to close positions. These events can happen, but they are very rare. Study what happened to the EUR/CHF pair in January 2015, if you are fascinated by such things.


The “6 basic questions” answered perfectly. :joy:

Fantastic, thanks Clint! That was really helpful!