Newbie Question on margins - Sorry!

Hi all,

I’ve been doing a lot of reading, watching videos and blogs etc over the past load of days to read up on forex trading.

I’m fully grasping pretty much everything but I have a slight problem with margins.

The reason I have a problem is that I’ve watched around 10 videos explaining margin and had 3 different contradictory explanations.

Let’s take the example below, I know it is basic but I will give you the 3 different answers I have obtained from watching the videos/reading;

$10,000 balance
$1,000 GBP/USD trade
100:1 leverage

Explanation 1:

$1000 is “locked” and the other $9000 is used as margin, therefore I could lose up to $9000.

Explanation 2:

$1000 is locked and an additional $1000 is used as margin, therefore I could lose up to $1000.

Explanation 3:

$1000 is locked the other $9000 is used as margin but a margin call of 70% would kick in which means the most I could lose is $2700.

Explanation 4:

$1000 is locked and an additional $1000 is used as margin but a margin call of 70% would kick in which means the most I could lose is $300.

Please tell me one of the above is correct?

Thanks!

Give the man a fish and all that.

Consider this, how would you find out if no-one gave you the answer?

Obtain a demo account and try it myself :smiley:

I guess what I want to know in that case is why people have different explanations of margin as above? Will I go from one platform where the margin is as per example 4 then jump on to another platform and they do it differently as per one of the other examples?

Forget the margin, this will only come into play if one, you don’t set a stop loss or two, you massively over leverage!. Simply calculate what percentage of your balance you are willing to risk per trade and using the BP calculator work it out in pips and set a stop loss to that pip level. At its simplest, you might decide to set a SL at 1% of balance. Next dependant on your time frame you scale the trade to fit a suitable SL. 5m might be say 15 pips at the other end daily might be 100 pips. As long as the SL does not exceed (in this example) 1% of balance… you will not need to consider ‘margin call’.

EDIT: If your even considering margin call when entering a trade… err… your doing something fundamentally wrong! LOL!!!

Correct.

Wrong. Only the first thousand is locked up. Any profit, or unrealized loss will float.

Wrong. The 70% will most probably be 70% of the initial $1000, so you could lose $9300.

Just WAY off base. Not even worth looking at anything that this source posted, ever again.