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

I have lived and breathed trading ever since trading fx professionally in London, Toronto and Philadelphia in the early 70’s (yes I know that shows my age!). While my professional career subsequently took me from the trading desk to designing treasury systems for some of the world’s leading financial institutions, my desire was to always trade for myself. As a consequence, following 5 years with a major international stock-broker

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