I’m just starting out in forex and trying to learn everything I can. Btw personally I have found that babypips
best site. I am currently doing school of pipsology which is great. So my question is how does the margin call
work in the forex world. I know when a bank gives you a margin call you need to cover what you owe.
But with a forex account do you just lose the money in the account or do you have to cover more than that?
I know its a long and confusing question but If anyone can answer it would be awesome.
You would still be liable for any other losses that occur after your account is empty. Some brokers will stop you out before it happens though.
You should never have to worry about this though, as if you use proper risk management rules you shouldnt risk more than 1-2% of your capital on any single trade. Always trade with a stop loss in place.
Hey, just open a demo account and blow it up, then open another one and blow that one too. Keep doing this until you understand everything.
And a margin call just means that you have no more money in your account or some brokers margin call you if your account is less than a certain percentage of your equity, say 20%. As a said if you blow up a few demo accounts you will know.
And when you manage to not blow up a demo account that’s when you can say you have a decent understanding of money management.
There is a myth creeping in in currency trading that it is inevitable that newer traders will blow several accounts. That is like assuming that a new racing driver will write off umpteen racing cars through crashing them into the barriers before finally figuring out how to get around the circuit. Blown accounts are almost paraded like a badge of honour sometimes on here, as some sort of proof that a trader is experienced.
Actually, if one is going to start with demo trading, I would advocate having that mirror the intended future live trading as closely as possible. So demo trade with the amount of money that will be used when the trading goes live… and demo trade with strict money management in place, that would be my strong advice. Demo the way one intends to trade, rather than some safety-free millionaire’s fantasy land.
To answer OP, as some others have said, with proper risk/money management and trading with a Stop Loss there should be no risk of a margin call. It is easy to worry about the disastrous end of trading when starting out, but start slow and small and build up and it is quite possible to build in the good habits from the outset, imho, and avoid going bust.
I would agree with that and am reminded of the quote: “We are what we repeatedly do. Excellence, then, is not an act, but a habit.” Aristotle? Harry Worth? Can’t remember.
One thing’s for sure. If you repeadedly practice losing money, you’ll get very good at one thing.
From memory - many years ago, so forgive me if I misstep! - this is a Durant corruption of a similar Aristotle quote. It’s a good 'un, though! Aristotle said the same thing, only shorter. Maybe the second part of the Durant version?
