You really need to speak to FXCM about their margin requirements, but I took this from their website,
One of the greatest concerns traders have about leverage is that a sizable loss could result in owing money to their broker. At FXCM, your maximum risk of loss is limited by the amount in your account. All accounts are tracked by our “Margin Watcher” feature. With the Margin Watcher feature, if account equity falls below margin requirements, the FXCM Trading Station will trigger an order to close all open positions
also
Up-to-date margin requirements are listed by currency pair in the MMR column of the “Simple Dealing Rates” window within the platform.
Babypips guidelines are just that, guidelines, all brokers handle margin calls, leverage etc. differently.
The test account as I understand from their website is set to 50:1 margin…
“FREQUENTLY ASKED QUESTIONS
Request a 100:1 demo account
The default setting for demo accounts is 50:1. If you plan to trade with higher leverage you can register for a demo account with leverage settings of 100:1. Register for a 100:1 Demo”
I didn’t request the 100:1…so I assume I’m on the 50:1 demo.
I’ve read through their margin documentation on the website, and it makes this statement…
"MARGIN CALLS
If account equity falls below margin requirements, the FXCM Trading Station will trigger an order to close all open positions. When positions have been over-leveraged or trading losses are incurred to the point that insufficient equity exists to maintain current open positions, a margin call will result, and open positions must be liquidated."
This basically says the same thing that babypips does, which makes perfect sense…
What I’m still missing, is why a margin call would happen under the following conditions…
What stands out is that you are trading a $50k account with 14 standard lots ($140/pip?) & free margin of $14000 without a stop loss.
That would mean that a movement in the market of 100 pips would wipe $14000 off your account.
Their is a maxim which says you should not risk more than 1% of your account (sometimes 2% but not greater than 5%). How much of your account is at risk?
The FXCM software may have detected this & closed you down before the proverbial s**t hit the fan.
It is good to demo trade, it is good to have a margin call, what is not so good is to risk so much of your account on one trade. Also will you start trading with $50k?
If yes carry on, but be careful of the the 1% rule.
If no, then get a demo account which is nearer to a realistic amount to trade ie $3000.
Get in touch with FXCM & ask the question, I would be interested to hear the answer.
I totally agree this trade was heavily leveraged. However, I was prepared to take it to 5-6% loss, before closing…and when I bought back in, it did eventually go where I wanted it to…(not sure I’d have the stomach with real money…but who knows). It got margin called by the broker when I was only down 4% of equity (50K - 2K = 48K), with plenty of room on the margin.
I’ve emailed FXCM (the sales guy that emails when you open the demo) to ask for clarification. I still feel like I’m missing something obvious, but just can’t figure it out.
I definitely hear ya on the leverage. Most of my demo trades have been far less than these. Right now I’m just trying to understand exactly how the margin call works…better to learn on demo than with real funds
Also, I think I made a math error…long story short…I think I was closer to 42K of used margin.
Jason from FXCM was kind enough to respond in the broker forum. I’ve posted a screenshot of the account history for him to look at, along with my “updated” math…which could still turn out to be wrong
If anyone is interested…the rest of the story will play out here…
