Which stop out level is more beneficial to a trader? 30% or 120% and why?

Beginner Questions
1

Hello Everyone,
Forgive me this basic question, but I am a newbie and finding myself difficult to understand the matter of margin, stop out level and a leverage.

I am thinking of opening an account with 20 000 AUD and don’t want to start trading without fully understanding these basics. Please, could anyone clear them for me?

What is the difference between a 100% margin call, 30% stop out level and a 100% marginn call, 30% stop out level? Two of the brokers I am interested in offer them options accordingly.

To make sure my trading idea and plan can wrok - I would especially like to know if it is technically possible to open a position with 5480 AUD in risk (SL over - let’s say 10 pips), when there is only 9070 AUD in the account. How big the position size would I have to open?
What account leverage should I use to be able to do so?

Looking forward to hear from you, traders! :slight_smile: And thank you ever so much in advance.

2

Excuse, but have I read this correctly or is there a mistype, but it seems you want to open an account with 20, 000 aud and no , or very little, knowledge of forex.

3

The key concept for you is probably that for your first year or so, it would be extremely unwise to expose more than 1% of your account to risk at any one time.

So with an account of 20,000, you’ll want your [B]maximum[/B] position-size, if your stop-loss is hit because it all goes wrong, to be 200.

If you use sensible position-sizing, “margin calls” are something you won’t ever need to worry about, or think about, at all.

If you need to think about margin calls, then you’re doing something so fundamentally wrong that you should be trading on demo, not with real money.

The only difference I can see between a 100% margin-call, 30% stop-out level and a 100% marginn-call, 30% stop-out level, is an additional letter “n” in the word “marginn” of one, compared with the other. Apart from that, they’re absolutely identical.

You really, really don’t need to know about this, to get started.

What you need to understand is position-sizing, so that it’s never relevant to you at all.

Here are two books to get you started …

(i) [I]Profitability & Systematic Trading[/I] - Michael Harris (Wiley 2007)

(ii) [I]Trade Your Way to Financial Freedom[/I] - Van K. Tharp (don’t pay any money into account until you’ve read this one, especially the second half of the book, about position-sizing!).

It doesn’t matter.

Sorry - not trying to be rude [B]at all[/B], but it’s an [I][U]awful[/U][/I] question and totally inappropriate, because to open a position size of 5,480 would be so extremely ill-advised without having over half a million in the account anyway! It really[B] is[/B] about as simple as this. :wink:

4

Thanks for replies!
LEXYS - wasn’t rude at all. :slight_smile: I got your point. And I’ve read Van K. Tharp’s book. I am totally aware of the fact position size of 5480 is massive and is not advised by anyone. It’s against the 1 - 2% risk on any given trade rule. My trading idea is quite original though and I would have to open such a position only if specific event and conditions come into being. Which is not very likely, and based on probabilities calculations it’s equal to 1:65536. Anyway, thank you for a reply! :slight_smile:

All I have to know to make sure my system could work - regardless of how crazy it may sound to conservative rules followers - is that: is it technically possible to open mentioned position of 5480 in risk over 10 pips SL, when the account balance before opening is 9070, or would it be impossible because of margin call and stop out institutions.

I apologize for an obvious mistake in my first post. I meant a 100% margin call, 30% stop out level in case of one of the brokers AND 120% margin call, 100% stop out in case of another. Sorry again.

EDDIEB - you are excused. :slight_smile: It’s not a mistake. I can afford 20000 AUD worth of live trading experience. But thank you for showing care.