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Thread: Margin, margin call and stop out level/ what they mean exactly

  1. #1
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    Margin, margin call and stop out level/ what they mean exactly

    I have notived that a lot of members in the forum are confused with the terms margin call and stop out. Many consider the margin call itself as the blowing of account. Though there is a close relation between these terms they dont mean exactly the same,

    Margin: Trading on margin is a big advantage in Forex trading. This means that to trade $100000 worth of currency you need not invest $100000 in your trading account. We all know that Roboforex offers 1:1000 leverage and so you can just invest $100 to trade $100000 worth of currency. In other words you can say that Roboforex requires its traders to keep a minimum margin of .1% margin to support your trades

    Margin call and stop out: As traders of Roboforex you must be aware that at what stage you will receive a margin call and what level you account will blow. In the pro cent account of Roboforex you have at margin call a 40% and the stop out level is 10%.

    So what does this mean exactly? in simple words if I try to explain, in the course of trading if your equity drops to or below 40% of the minimum margin required to open the trades, you will receive a margin call and when your equity further drops to 10% of the margin required than you experience the stop out which is more commonly known as account blowing. So you can understand that the leverage you chose have a say as to when you will receive the margin call and when your account is stopped out. When you get the margin call you may decide to deposit more funds to avert the stop out level or simply wait for the future to unfold a recovery or a stop out.

    As every trader can understand that both margin calls and stop outs are terrible things during trading and the best safeguard against them is to properly follow a risk and money management system.

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  2. #701
    Trader layigold's Avatar
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    Quote Originally Posted by touqir View Post
    its good if you are earning good here but remember do not be over confident i used big lot again with over confident and my order was in 50% loss of whole capital so now i am free of that loss order because of gbpusd big move. so some time our over confidence our big risks can give us margin call. i have got on demo but not on real so i want to take small risk to avoid margin call you should also use some small lot size for slow but consistent earning
    I quite agree with you that overconfidence is bad and that can cause serious problem on the account but all the same a forex trader must have a good sense of self confidence both in himself and his trading strategy . It is not important we trade exactly the same way but as long as each trader is successful in the way he trades , I consider the goals of trading already achieved . One thing I know for sure is that if a trader can carefully manage the risks of trading , margin call will stay million miles away from such .

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  3. #702
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    Margin call occurs when a broker demands a more fund to be deposited into the trading account to avoid losing all the money, If a trader does not carefully manage the risks of trading, he will have a margin call, no matter how good the trading strategy might be, traders should use good strategy and make the strategy work with proper money and risk management, that will stop margin call from repeating in their account.

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  4. #703
    Trader Sascha's Avatar
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    Quote Originally Posted by Nova View Post
    Margin call occurs when a broker demands a more fund to be deposited into the trading account to avoid losing all the money, If a trader does not carefully manage the risks of trading, he will have a margin call, no matter how good the trading strategy might be, traders should use good strategy and make the strategy work with proper money and risk management, that will stop margin call from repeating in their account.
    it explains how bad we trade and we need to let it go off unsaved or inject more money to increase the margin level. i'd prefer to take the first option to leave it as it is because when my account is showing a margin call status, it has little chance to survive and market will go reverse along with the trades. most of market movements goes in big impact and leave us in loss if we placed the trades at wrong timing and price.

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  5. #704
    Trader sniper007's Avatar
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    Quote Originally Posted by Sascha View Post
    it explains how bad we trade and we need to let it go off unsaved or inject more money to increase the margin level. i'd prefer to take the first option to leave it as it is because when my account is showing a margin call status, it has little chance to survive and market will go reverse along with the trades. most of market movements goes in big impact and leave us in loss if we placed the trades at wrong timing and price.
    You are right about that, because in a nutshell, we don't have to keep on getting margin call, as we need to be in a control on how we trade the market. That means we making use of good money and risk management and then most of all making sure that we are making good analysis and validating the signals before taking it.

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  6. #705
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    Quote Originally Posted by sniper007 View Post
    You are right about that, because in a nutshell, we don't have to keep on getting margin call, as we need to be in a control on how we trade the market. That means we making use of good money and risk management and then most of all making sure that we are making good analysis and validating the signals before taking it.
    the real benefit of risk management i have learnt from last order. when i lost all profit almost here, with hard work of month i earned profit with daily target but in end before some days i lost all profit in single order so i realized why people prefer to use money management, i thought i can close all orders into profit but that way i was wrong

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  7. #706
    Trader Sascha's Avatar
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    Quote Originally Posted by altafch View Post
    the real benefit of risk management i have learnt from last order. when i lost all profit almost here, with hard work of month i earned profit with daily target but in end before some days i lost all profit in single order so i realized why people prefer to use money management, i thought i can close all orders into profit but that way i was wrong
    first you didn't manage your risk properly and forgot to set stop loss as i can see you lost all your profits from one single trade. i believe that single trade got big lot size which made your trading account easily swiped by market. this is your own experience to learn and i'm sure you got it under control now. i've done the same and lost many times with market, but i consider it as my sacrifice to turn things into my own source of learning.

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  8. #707
    Trader layigold's Avatar
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    If you carelessly manage the risks of trading and you are not ready to accept loss when it is still affordable as a trader , you have already given an open invitation to margin call and what this simply means is that you have run of of money to support your open positions. It is either you make some deposit into your account to avoid stop out and that is a situation where some of your open trades are closed by the dealers to avoid being affected by your negative balance

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  9. #708
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    Quote Originally Posted by layigold View Post
    If you carelessly manage the risks of trading and you are not ready to accept loss when it is still affordable as a trader , you have already given an open invitation to margin call and what this simply means is that you have run of of money to support your open positions. It is either you make some deposit into your account to avoid stop out and that is a situation where some of your open trades are closed by the dealers to avoid being affected by your negative balance
    you are right when we do not trade with management its just loss, in trading i prefer to accept realities because some people really do not accept realities they trade on base of imaginations, but we can do good if we accept reality if we accept what we are and what we can do, we just follow and compete experts but do not want to do hard work, so its wrong way for trade

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  10. #709
    Registered user nsawork's Avatar
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    Quote Originally Posted by layigold View Post
    If you carelessly manage the risks of trading and you are not ready to accept loss when it is still affordable as a trader , you have already given an open invitation to margin call and what this simply means is that you have run of of money to support your open positions. It is either you make some deposit into your account to avoid stop out and that is a situation where some of your open trades are closed by the dealers to avoid being affected by your negative balance
    When we are doing our trade with lower account balance then we need to make sure that our account equity is sufficient to cover our trades and the market movements. What actually happens is that most of the traders do not take into account the risk of a loss and so they tend to open higher trading volumes in their trading account.

    In the event of a loss their account equity becomes less than the margin that is required for the trade to be open and so the trade gets stopped out and the account is blown.

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  11. #710
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    I like the way I trade, I trade with the use of good risk management in all the method I am trading with. Therefore that has been the good decision to be made and then another thing is making sure that analysis is been done on the right time frame, that is so much important. Margin call is not that simple to avoid, we have to keep on learning to make strong analysis if we want to make money and become profitable.

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