Margin Calls by Malcolm Morley

Margin Calls by Malcolm Morley

The following explains in practical terms how margin rules work at OANDA. It was given in response to a newcomer considering using Margin Calls as a risk management tool. Not something I’d recommend!

The following explains in practical terms how margin rules work at OANDA. It was given in response to a newcomer considering using Margin Calls as a risk management tool. Not something I’d recommend!

If you are ‘fully loaded’ a margin call will take half of your account. If not, it will take even more !

Please understand what you getting into (ie the margin math’s) before you risk real money with this strategy.

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Say you have a $1,000 account.

If your margin is set at 50:1 you can take out a $50,000 trade. OANDA requires $500 maintenance margin for this. Therefore if the position loses more than $500 (ie your NAV drops below $500), OANDA will close the position. The loss is therefore approximately 50% of your account.

However, if you had only taken out a $30,000 trade, OANDA only requires $300 maintenance margin. Therefore the position can lose $700 before OANDA will close the position. The loss on margin call is therefore approximately 70% of your account.

The same principals apply to any margin setting.

~chaffcombe