Is Leverage Factored In For Margin Calls In Forex?
Posted by benny in Barebone PC on December 28th, 2009 | one response
For example, if I a currency pair goes down and I bought a unit using leverage and have Lets say $1,000 left in my account. On a 100:1 leverage, will I be able to support a loss of $100,000 before they perform a margin call?
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One Response to “Is Leverage Factored In For Margin Calls In Forex?”
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No, while you can control 100:1 size, when the position goes against you you only have your $1000 to play with. Now, most brokers are supposed to issue a marging call when your positon reaches half that. In this example, your trade should be closed when you have about $500 left. This means, that if you have $100,000 trade size, one pip is about $10 value(depending on currency pair), your position will be closed when the trade is about 50 pips against you. Some brokers could stretch it to 60-70 pips, which would leave you with $300-400 in account. For exact numbers contact your broker, but these are general rules.
Using maximum leverage is not recommended.