So i am demoing on a 5k account with FXDD. All i am doing is trying to identify trends and breakouts, however i miss most of them when i am sleeping. So i was bored and deviated from my stratagey and went long (1 lot) on USD/CAD just because in my mind it could not drop any lower. Of course it did. SO i bought another lot… because it just can’t get much lower! But it did. So leason learned on the fact that you can never predict the market as it is random and always follow your stratagey.
So both of my trades were down a fair bit, However when i came home from work i noticed they were both closed and i was left with a balance of just over $1900. So why were the trades closed? This really can’t be margined out if i still have this much money left in the account.
ps and yes i know buying two lots on a 5 k account with 100 to 1 leverage is excessive. In real life i would likely only have .5 of a lot open at one time at 100 to 1.
Hobbit has explained to you exactly what happened. If your broker doesn’t offer you a credit facility (incase you were wondering, I don’t know one who does), you will always have some money left in your account after a margin call and a subsequent stop-out. Good as it lets you start again, but not a good idea to open new positions immediately as you’d be seething. In demo its not much of a heavy emotional state but in a real account one does some crazy things, like a lunatic :eek: .
What led to the position(s) being closed is you increased your losing position size. Thats a big mistake, you’d ideally have to cut your losses and go back to the drawing board.
Another thing to remember, the market is like a wild horse, it goes where it wants to :eek: .
Thanks for the replies guys. To be honest i really struggle with the mathematics of forex, calculating margin, leverage and really understanding these figures. I am still trying because i enjoy the charting with following patterns and such, i find that easy.
I think Hobbit what you are telling to say to my thick head is that each lot of USD/CAD at my leverage cost 1k of used margin. SO in my 5k account i had two lots open and had 2k of used margin. SO that left me with 3k of useable margin which i pee’d away. Once your usable margin is gone than you get a margin call, the positions are forceablly closed your broker and you are left with a balance in your account of the previously used margin or so depending on the exact price that your positons were closed there is some deviation), in my case about $1900 left.
I get confused because people keept throwing the word margin around. I need to identify this as used or unused in my head to know what that really means.
As an after thought using excessive margin (having too much used and not enough unused margin) in your account is not such a bad thing really. Yes your margin call comes much earlier and you will not be able to ride out any long term positions (if they are losses) however margin call may not be such a bad thing in this case. In fact with exessive margin you could used this as your stop loss since you will still have a good chunk left. I was always left with the idea that margin call meant you basically have nothing left in your account.
However in theory if you used crazy used margin like 3 or 4 lots in a 5k account and were entering a short term position your pips would be worth alot of money and you would either be margined out very quick (with lots of balance left) or you would be making a ton of money.
willsucced you have a perfect understanding of it like hobbit says but, I do not think that you want to use a margin call as your stop loss. That is what you call rocketing your way to the poor house. Remember the first word in the “risk to reward”, if you want to risk your whole account on each trade you will not be in the game for vary long and even if you do hit a big winning streak only a few losses will take away most of your winnings and then some.
The thing with demos is you have to treat them like they were your real account and MONEY. Do not do anything with a demo that you would do with your live account. Unless you do that then all of the demo trading will do nothing for you. You will take risk in a demo that you will not want to take with a live account. Emotions come into play when it is live.