Quote:
Originally Posted by rogerzebra
Hi All,
I’m new to trading and I have this question that I think should be quite obvious. So, excuse me for asking but I need to know the rules of stop losses. Let’s say that I have a $200 micro account, I buy a 2k lot which is 5% of my account, right. Am I correct when I assume that the maximum of pips that my stop loss could be placed at on a 2k lot is 200 pips? What happens if I don’t have a stop loss and the trend goes against me and passing beneath those 200 pips, is the position going to be closed out? Or does it starts to take $ of my account? I appreciate an answer for anyone that could clarify this for me. Thx
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stops are not guaranteed and they are offset as market orders. They would be filled at the best available price. If you don't have your stop set and the market goes against you, it can wipe out your whole account and get a margin call. Let me know if this makes sense. The following is an explanation on margin call as well:
The idea of margin trading is that your margin acts as a good faith deposit to secure the larger notional value of your position. Margin trading allows traders to hold a position much larger than the actual account value. FXCM’s online trading platform has margin management capabilities, which allow for this high leverage. Of course, trading on margin comes with risk, since high leverage may work against you as much as it works for you. If account equity falls below margin requirements, the FXCM Trading Station will trigger an order to close all open positions. When positions have been over-leveraged or trading losses are incurred to the point that insufficient equity exists to maintain current open positions, a margin call will result, and open positions must be liquidated.
Please keep in mind that when the account's useable margin reaches zero, all open positions are closed. The margin-call process is entirely electronic, and there is no discretion on FXCM’s part as to the order in which trades are closed. Such discretion would require FXCM to actively monitor positions and accounts.
Example: A trader has $50 in a Micro account and the margin requirement is 0.25% (i.e., he has leverage of 400:1). For each position he opens (each position = 1 lot = 1,000 notional value), he is required to set aside $2.50 in used margin. If he opens two positions, his required margin is $5. The trader can lose up to $45 before he starts dipping into his margin requirement. When his account equity reaches $5, a margin call is triggered and all positions will be closed.
It is strongly advised that clients maintain the appropriate amount of margin in their accounts at all times. Margin requirements may be changed based on account size, simultaneous open positions, trading style, market conditions, and at the discretion of FXCM.
