In preschool of the school of pipsology when it talkes about stop out level, it says “Used Margin can’t go below $200 because that’s the Required Margin that was needed to open the position in the first place.”
But in the first trading scenario, used margin is changing during the trade… How is this possible?
Hi BabyGooat
I believe the ‘used margin’ (or just margin) is the amount of your funds that is needed to open the position and shouldn’t move during the trade. However, the ‘free margin’ will fluctuate during the life of the trade and will track against how well the trade is going. Your ‘Free Margin’ is what the broker will use to close the trade early with a margin call.
Free Margin = Account Balance - Used Margin + Unrealised Net
Hey Pauley1
First of all, thanks for your response!
I get your point, but in that first scenario it says: “You’ll notice that the Used Margin has changed. Because the exchange rate has changed, the Notional Value of the position has changed. This requires recalculating the Required Margin. Whenever there’s a change in the price for EUR/USD, the Required Margin changes.”
But as far as I know Account Balance and Used Margin cannot change during open position.
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I think that this is because the trade was opened with an account using USD as the currency. But if you notice on the EURUSD pair EUR comes first, which means this is the lead currency for the trade and not the USD. So I believe that the margin will indeed change in line with the exchange rate as the account is in USD and the trade is in EUR. If that makes sense.
I may be completely wrong, and if I am I’m sure someone else on here will correct me!
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Damn… Didn’t even think about it. Lemme take my time to understand and process it lol
(btw just tried opening a position in EURUSD on mt5 and used margin doesn’t change🤔)
trading can be confusing sometimes ngl
Have you finished the School of Pipsology yet? If you haven’t I would recommend you ditch placing any trades etc until you have finished as there is tons to learn even up to the last lesson.
I will definitely finish it before placing my first real trade. I only use a demo account.
I found that demo trading whilst still learning was a distraction and the more I went thought the course the more I realised how much of a distraction it was. But that’s just me. I wish you all the luck on your trading journey.
Used Margin doesn’t change, except you add more positions.
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