Hey all,
Last week I started a demo account, and quickly realized, that if there’s no “demo” margin call, or use of a stop-loss, an untrained monkey could make money if and when the pair go’s back into the money…
My question’s regarding a margin call…in reality.
Take two traders named A and B, both take an identical trade, with an initial outlay of say $50, neither A or B used a stoploss.
All of a sudden they fall prey to “whip-saw” and the trade go’s way against them for the tune of $400 and climbing…
Trader A is trading from an account worth $5000, and Trader B’s account is $30000. At what point will Trader A and B, receive a margin call? is it based on each individual trade?, or based on the accounts total equity? If so, now trader C took the identical trade with an account of over $100000 and didn’t bother with a stop-loss, statistically speaking would it be similar to a demo account?, trading over-all, with the trend, and eventually after a few days the currency pair would get to the take-profit point despite going against the trader initially for up to $1000? and no margin call?..your thoughts…
In answer to this, using the $50 outlay, leverage would determine the length of time before margin call happens. So yes, it would be different for each trade depending on the way the account is set up.
The ‘eventually after a few days the currency pair would get to the take-profit point’ is the part here that will hose you in the long run. Let’s say 3 months ago, you bought a euro… Need I say more?
Depending on your timing, you may have been smart and gotten out at b/e, or by now blown almost any size account, depending on your lot size.
That was why I mentioned…“in reality” the first thing a trader should consider when poised to take a trade is the exit plan, ignore the “how much will I make?” and concentrate on the “what if i’m wrong?” but the question still hasn’t been addressed, at what point is the margin call going to be placed? on the amount that the trade has gone against a trader? or based on total account equity?
Let’s assume with the “indicators” that the trend will move a certain direction and at a certain point that the traders have identified WILL change direction, so they place trades…during the trades journey it spikes up/down. For the purpose of the question for what-ever reason there was NO stop-loss. At what point would the margin call come into play?..(Since it’s hypothetical, lets make the assumption that some super new software indicator appears with 100% accuracy, and only the three traders A,B and C have it…and it couldn’t predict the price spike)…and now there’s that margin call.
…and yes inexperience will take one to the poor house, and sometimes the price is like a stick with no retriever…sometimes it wont come back…
and before someone says it…yes there is NO such software…it’s hypothetical.
Excellent, thanks Master Tang much appreciated. You had re-posted just as I was in the midst of posting lol. I guess this post is a pseudo reply to another recent post regarding someones instant success with a demo account, without any sort of risk management.
I tried to answer your question, but the $50 outlay has a lot of variables.
In short, whenever your free margin drops below your trade margin, you’re done.
End of game.
Some brokers will close you out at a percentage of your free margin, but since you’ve maxed out your account, you may have to ante up again. Unless you were overleveraged, then just a downsize in your trade margin will get you running again.