@ Muhammad Yusuf:
I trade with the XM broker with a standard account where 1 lot = $100,000...
- Indeed, all standard forex brokers have a contract size of USD 100,000. This is a provision in the international forex market.
In this case, you can choose the account type. If you choose a standard or regular account, you can only trade with a minimum size of 1 lot, so it can be 1 lot, 1.5 lots, 2 lots, etc.
If you choose a mini account, you can only trade with a minimum size of 0.1 lot, so it can be 1 lot, 0.15 lot, 0.2 lot, etc.
If you choose a micro account, you can only trade with a minimum size of 0.01 lot, so it can be 0.01 lot, 0.015 lot, 0.02 lot, etc.
The size or volume (lot) is adjusted to the size of your capital because it will determine the value per pip. So the value per pip for each lot size is different.
I asked their CS if the margin level is below 50% then a margin call will be triggered and if the margin level is below 20% it will stop out.
- This means that the Margin Level provision (or in this case Margin Call Level) from your broker is 50%, and the Stop Out level = 20%.
Margin Level = (Equity / Total Margin) x 100%
So if Equity reaches 50% of Total Margin, you will get a Margin Call (MC), and if Equity reaches 20% of Total Margin, you will get a Stop Out, which means all your open positions will be automatically closed, regardless of whether they are in profit or loss.
usually if my free margin is already 0 then it will MC...
This means the Margin Call Level = 100%, Sir, not 50%.
Free Margin = Equity - Total Margin
If Equity = Total Margin, then Free Margin = 0.
And Equity = Total Margin occurs if the Margin Level = 100%.
Indeed, Free Margin will not be listed as negative, but if the Margin Call Level = 50% is true, then when your Free Margin = 0, you will not be hit by MC yet. Only when Equity = 50% of Total Margin will you be hit by a Margin Call.
Information from CS is sometimes different from the actual situation. But in this case, just assume your Margin Call Level = 100%.
…. but if the policy is like that, how do I know my capital's resilience?
As we explained in our answer to your previous question, resilience is determined by pip value and margin. The pip value is determined by the lot size you choose, and the margin value is determined by the leverage you choose.
To find out your capital's resilience, you must first calculate the required margin.
For example, your capital is USD 1,000.
You trade in the XXX/USD pair, say EUR/USD, with a mini account and with leverage of 1:200 or 0.5% of the contract value. (For information, see: Margin In Forex Trading (2) ).
Margin = (USD 100,000) x (number of lots or volume) x (margin percentage) x current market price
If you buy or sell 0.1 lot EUR/USD at a price of 1.2330, then the margin = (USD 100,000) x 0.1 x 0.5% x 1.2330 = USD 61.65
Your remaining funds = USD 1,000 - USD 61.65 = USD 938.35.
The pip value for EUR/USD for 0.1 lot = USD 1.
So your resilience is (USD 938.35) / (USD 1) = 938 pips.
So when you lose 938 pips, or Equity = Margin = USD 938.35, or Free Margin = 0, you will get MC.
Hopefully this can help.
@ Wulan:
- … Any tips to share?
Before trading in a real account, it is best to trade in a demo account first until you can generate consistent profits.
- … Also, is it true that to keep the account alive, the margin level must be 2000%? How do you calculate it?
There is no benchmark for the size of the margin level. What needs to be maintained is a minimum margin level to avoid a Margin Call (MC).
Margin Level = (Equity / Total Margin) x 100%
If the broker sets the Margin Call Level to 100% of the Margin Level (each broker can be different), then you must maintain a minimum Equity = Total Margin.
For example, you are trading on a broker that applies a Margin Level of 100% for Margin Calls, and you still have USD 5,000 with several open trading positions totaling a loss (excluding margin), with a total margin of USD 500.
If your total loss has reached USD 4,500, you will be subject to a Margin Call, because your Margin Level = ((USD 5,000-USD 4,500) / USD 500 ) x 100% = 100%.
@ Wulan:
That is the formula to determine the margin when opening a position on the XXX/USD pair (EUR/USD, GBP/USD, AUD/USD, NZD/USD). For the USD/XXX pair (USD/JPY, USD/CHF, USD/CAD) it is not necessary to multiply by the current market price (price).
The contract size remains USD 100,000. If you are trading in a mini account, the minimum lot is 0.1, and if trading in a micro account, the minimum lot = 0.01.