Question about retail FX margin

Discussion in 'Risk Management' started by lentus, Aug 4, 2019.

  1. Overnight

    Overnight

    I'm just trying to indicate to you that at the CME, there is no such thing as "Intraday exchange margin", and it is not set at some fixed level of what you seem to think the CME margin requirement is, some arbitrary level. There is Initial, and maintenance, and THAT'S IT.

    What your broker does with it and allows you to do with it is a whole other ball of wax
     
    #21     Aug 4, 2019
  2. lentus

    lentus

    So I came up with a little equation that should tell me how many pips a trader can lose before getting a margin call.

    We assume that we always go long EURUSD and our account is in $. We assume that Margin Level for margin call is 100% meaning Equity = Current Margin Used.

    R = ratio of Initial Used Margin (as a proportion of Balance). R=Initial Used Margin/Balance
    L = Broker's leverage
    A = ratio of negative (because we are long) change in the rate before we get a margin call.

    A = (1-1/R)/(1-L)

    For example:

    R=0.5 meaning out of $10,000 balance we will use $5,000 as Initial Used Margin. L=50.
    A = 2.0408%
    So EURUSD can fall that much before we get a margin call. If the rate is 1.1117 then this would be equivalent to 227 pips.

    Is this correct?
     
    #22     Aug 4, 2019
  3. bbpp

    bbpp

    Look at your platform, there is a place showing your balance, equity ,positions and margin used, free margin.Compare your margin used and free margin, you will have an idea how much margin you still have, and when you could fall below margin requirement.
     
    #23     Aug 5, 2019
  4. lentus

    lentus

    Dude. I know I can look at my platform, thanks. I'm planning my risk ahead of time which is something you should probably consider yourself. That's why I'm bothering with making my own formulas, making Excels and asking lots of "dumb" questions.
     
    #24     Aug 5, 2019
  5. bbpp

    bbpp

    Planning risk ahead of time, don't short euro.
    Long euro, long gold, short equity.
     
    #25     Aug 5, 2019