margin call question

Discussion in 'Forex' started by will_jay, May 25, 2005.

  1. will_jay


    hey guys, quick question here

    I'm just seeing if I understand this...

    if I put up $100 for a trade
    with 100:1 margin

    does that mean I can withstand up to a 2% drawdown of the trade before I get a margin call?

    And if so, then does that mean that with margin calls there is no possible way to loose more than you put up (in this case $100)?

  2. There are 2 margins:
    initial margin: amount you need to open a position
    maintenance margin: minimum margin to keep an open position

    If you drop below the maintenance margin you will have to add up till the level of initial margin again.

    You are always responsible for the total loss of your position. So if the market goes down 5% it will cost you 5%, no matter how much money there still is in your account t. Losses are never limited, read carefully the documents from your broker.

    So you can loose 5000$ on a position that was opened initially with only 500$ on your account.

  3. With Refcofx maximum loss is your un-used margin without stops.

    In your example if your account has a balance of $1000.00 maximum loss is $900.00. If the balance was $110.00 maximum loss is $10.00.
  4. So Refco closes automatically your position just before you lose everything. They don't do that for you, they do that to protect themselves.
    I wonder what would happen if, due to circumstances, the position would be impossible to close as planned and there would be a substantial loss above the net value of the account.
    Will Refco pay or will they force you to pay?

  5. With FX, you're probably betting against the 'house' anyway, so they don't *really* have any losses in the long run. It's a good game for them. The small pikers always lose against modern bucketshops.

  6. TerryL


    I suggest you start off by reading the threads started by myself. Just do a search. Hopefully, you will be in a better educated position to make your decisions.
  7. The best thing is to make sure you never get a margin call.
    Better study on that one then on how margin calls work.
  8. TerryL


    Come on Spike

    Do you seriously believe in the dribble that ejects from your mouth ?

    "The best thing is to make sure you never get a margin call.
    Better study on that one then on how margin calls work."

    How is he even supposed to not get a margin call if he never knows what it is ??

  9. If you use stops and don't let losses run up, you will never know (or need to know) what margin calls are.
    If you get a margin call it means your loss went far too far.
    I associate margin calls with losers.
  10. TerryL


    Spike, I consider those that aren't knowledgable and those that try to tell others not to seek knowledge are the losers. And I am sure everyone else sane would side with me.

    So sorry, but you are the one promoting ignorance. Sorry.
    #10     May 26, 2005