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How to reduce risks of margin call with small balance?

andromeda1
Dec 05 2016 at 22:11
108 Posts
Hello,

i created an ECN Pro account with FXOpen, 1:200 leverage, $100 deposit. And i opened 0.01 lot position on BRENT chart.

and issue is that loss/gain while position is open is too fast, i mean i feel that my account can be doubled or wiped within average trading day..

I would like to be able to survive market movements for one month, or more precisely, i would like not to face margin call (25% maybe, if i remeber my broker correctly) even if i BUY BRENT and BRENT price will be 50% higher/lower of what i purchased/sold.

What are ways to trade BRENT/OIL with $100 and open lets say 1 year trade without reaching margin call if price goes against me and the OIL price will be approx. 50% plus or minus from time of initial order?

Sorry for my bad english, i am trying my best to explain.


rob559
Dec 06 2016 at 08:26
1916 Posts
kennyhubbard (compuforexpamm)
Dec 06 2016 at 10:04
265 Posts
@andromeda1, if I understand you correctly, you are looking to do some sort of long term trade and you are hoping to ride out any swings that go against you???

I would put it to you that there is no way to eliminate the risk......that is the very nature of forex. Possibly your strategy is not appropriate for the instrument that you wish to trade(OIL) and the account size. With $100, you should seriously be looking at a cent account rather and find a strategy that works with the instruments available(unfortunately, all cent account I have come across have limited trading instruments available).

Anyway, good luck with your plans......

Wealth Creation Through Technology
Janeo
Dec 06 2016 at 13:38
18 Posts
First thing you need to understand that most of the brokers provide 1 lot of Brent oil as 1000 units i.e. 1000 barrels. So I would suggest to find a broker which takes lower quantity per lot, like 1 lot = 1 barrel. Secondly you can increase your account leverage which will allow you to place more trades as margin used per trade is minimized.
Also I will suggest you to consider the swap charges for Brent oil as well. They may impact you due to less funds. To safeguard your interest you can use few risk parameters to manage your position, there do exist EA's which will notify you if your margin call is about to hit so that you can hedge your position or move accordingly. But crude swaps are sometimes enough to eat your fund.


VickyJones
Dec 06 2016 at 13:50
45 Posts
I think that kennyhubbard has a point. The Brent Crude Oil price jumped by about 30 dollars since January 2016 and you will need to monitor your open position often to avoid any possible margin calls. Why don't you test this for awhile on demo to get a good confidence first?

VickyJones
Dec 06 2016 at 13:51
45 Posts
@Janeo Very important point about the swaps, indeed!

andromeda1
Dec 06 2016 at 14:06
108 Posts
Janeo posted:
find a broker which takes lower quantity per lot, like 1 lot = 1 barrel.

thx, please how to recognize from the broker website that they takes this lower quantity? Currently im with FXopen, cant!t remember i seen anything like this on their site.

Janeo posted:
increase your account leverage

You mean when i am at 1:200, i should try 1:500 for example?
PS: would like to see difference between old and new leveraged account regarding margin. I can!t imagine how it would look like in MT4.

Janeo posted:
consider the swap charges for Brent oil as well.

You mean that i will pay alot of $ for position open/close in case of OIL right?

thx for valuable input

xgavinc
Dec 06 2016 at 14:15
235 Posts
Keep margin level above 1000%, bellow 1000% = fund account only, above 1000% place a trade. I use this rule on a 700% margin level (little more risk, but I won't get a surprise within a day or even 2 (1:100 leverage), under 500% at the end of the month means I have to fund my account) - make strict rules and stick to them.

@Janeo 'Secondly you can increase your account leverage which will allow you to place more trades as margin used per trade is minimized.' - not good advice. I went from 1:1000 to 1:100, I lost thousands on high leverage (looks good, go to bed, wake up, wiped account), on 1:100 I can sleep at night. More trades (especially on one symbol) exponentially increases risk. Good advice on swaps... the little gremlins that nibble at your account every night.

For every loss there should be at least an equal and opposite profit.
Torsten (tormess)
Dec 06 2016 at 15:51
52 Posts
I also agree with the comments about swaps importance. For such long term trades this can make a huge difference. When it comes to leverage, I consider anything higher than 1:50 for oil quite risky but a good point was mentioned also about the size of the lot (1, 10, 100 or more barrels) as this is the ratio you use to calculate the value of your trade.

@andromeda1 if you don't find info on the website, just ask the support via chat or email 😄

rob559
Dec 07 2016 at 07:14
1916 Posts
Janeo posted:
increase your account leverage
You mean when i am at 1:200, i should try 1:500 for example?
PS: would like to see difference between old and new leveraged account regarding margin. I can!t imagine how it would look like in MT4.


you need to learn before trading,you are doomed to failure as hundred of wannabes traders ready to make a quick buck without learning anything, the is a category for that (lazy category)

Carlos (CarlosMZ)
Dec 07 2016 at 07:16
55 Posts
@andromeda1 Why did you chose to trade the brent oil at first place?

vontogr (togr)
Dec 07 2016 at 07:52
4862 Posts
Go back to demo trading.
If you are profitable deposit at least 1,000 and trade the same way
If you are not, dont trade real

Jay (lee42747)
Dec 07 2016 at 16:02
49 Posts
rob559 posted:
you need to learn before trading,you are doomed to failure as hundred of wannabes traders ready to make a quick buck without learning anything, the is a category for that (lazy category)


You know what? I think here you are absolutely right! I read a lot of topics where people calling themselves 'newbees' are waiting for others to give them the clue instead of spending enough time on demo testing and doing the match themselves.

andromeda1
Dec 08 2016 at 00:11
108 Posts
thx for the info. REGARDING SWAP WARNING
when i right click BRENT symbol in my FXOpen ECN Pro MT4, select Specification, i see the Swap on long position is -33 USD, short is +24USD.
Contract size is 1000 (barrels? which means 1 lot is 1000 barrels?), tick value is 10.0
----
When i want to calculate how much i loose/gain when i trade BRENT over night, i use calculator https://www.fxpro.co.uk/trading/calculators/swap
In the calculator i see that if i set 'Trade size' to 10 (barrels) because i trade 0.01 and it is 100 times smaller than 10 000 which seems to be volume set by my broker.., result is this Swap (fee) per one trading day when trade is open:
-0.33 USD
+0.24 USD

So does it mean that if i buy BRENT with $100 account balance and 0.01 lot, after 303 days it would eat my $100 account if BRENT price not changed and wipe it 50% faster if BRENT price decreased by 50% (low margin)?
=======================
REGARDING LEVERAGE CHANGE
Janeo mentioned that if i increase leverage, (from 1:200 to 1:500 for example) then i will be able to place more trades because margin will be decreased. But xgavinc have opposite experience regarding leverage effect on margin. Torsten adviced leverage below 1:50...

When i opened SELL 0.01 lot on my $100 account with leverage 1:20, EUR/USD pair i am getting:
margin 53.79 USD
free margin:49.17 USD
margin level: 191.40 %
(xgavinc adviced 1000%+ margin level 😲, how can i have it?)

xgavinc
Dec 08 2016 at 07:54
235 Posts
andromeda1 posted:
When i opened SELL 0.01 lot on my $100 account with leverage 1:20, EUR/USD pair i am getting:
margin 53.79 USD
free margin:49.17 USD
margin level: 191.40 %
(xgavinc adviced 1000%+ margin level 😲, how can i have it?)


That means you are under capitalized. On higher leverage you can open more trades, but more trades equal more risk, so you want to increase leverage to increase your risk?

Put leverage on 1:100 (Maximum), then you would need to concentrate on just funding your account (if you keep it over 700% margin level you should be ok for any 'longer' term eventualities, under 700 = fund account when you can, no new trades, over 700 = you are allowed to open a new 0.01 trade). Your concentration should be shorting oil only, as you have a longer term outlook, you want swaps to work for you not against you - you wouldn't invest money at the bank for 3 years at a negative interest rate, so don't do it here. Remember also, swaps Wednesday nights are triple to make up for weekends.

For every loss there should be at least an equal and opposite profit.
xgavinc
Dec 08 2016 at 08:02
235 Posts
As an added tip for any other new traders, if you are under capitalized (< $1000), keep leverage as low as possible, but open a micro account instead (cent account) of a standard account. A standard account with high leverage and under-capitalization is a recipe for disaster. Don't look for excuses to trade more, look for solutions to protect what you have - there is no worse feeling than trading for a year or two and losing it all within one day.

For every loss there should be at least an equal and opposite profit.
vontogr (togr)
Dec 08 2016 at 08:45
4862 Posts
xgavinc posted:
As an added tip for any other new traders, if you are under capitalized (< $1000), keep leverage as low as possible, but open a micro account instead (cent account) of a standard account. A standard account with high leverage and under-capitalization is a recipe for disaster. Don't look for excuses to trade more, look for solutions to protect what you have - there is no worse feeling than trading for a year or two and losing it all within one day.


@xgavinc
With all the respect I do not recommend low leverage for small account.
I do recommended to protect account with stop losses instead of leverage.
With low leverage possibility to solve many situations is limited.
Once I wrote topic here where I described it in details.

xgavinc
Dec 08 2016 at 09:07
235 Posts
togr posted:
xgavinc posted:
As an added tip for any other new traders, if you are under capitalized (< $1000), keep leverage as low as possible, but open a micro account instead (cent account) of a standard account. A standard account with high leverage and under-capitalization is a recipe for disaster. Don't look for excuses to trade more, look for solutions to protect what you have - there is no worse feeling than trading for a year or two and losing it all within one day.


@xgavinc
With all the respect I do not recommend low leverage for small account.
I do recommended to protect account with stop losses instead of leverage.
With low leverage possibility to solve many situations is limited.
Once I wrote topic here where I described it in details.


Yes, it doesn't solve all the problems, however, here you have a trader with a medium to long term outlook (sounds like more to do with investing than trading), what I'm trying to attempt is for this trader to be able to sleep at night, the higher the leverage the quicker a negative move makes an impact. At a high leverage, low capitalization and what seems to be a standard account, he can experience a ok position before going to bed to margin call during sleep. That is the point I'm trying to get through, it's advice, whatever other measures the trader implements to protect capital is up to them, but why patch an already bleak outlook... 1. he is under capitalized, 2. for a standard lot account (fix that and leverage becomes less of an issue).

I have $100, my first plan would be a cent account, then I will think of leverage. Would you seriously take $100, standard account at 1:500+ leverage? I can't believe the great vontogr would do that 😁

For every loss there should be at least an equal and opposite profit.
vontogr (togr)
Dec 08 2016 at 09:21
4862 Posts
xgavinc posted:
togr posted:
xgavinc posted:
As an added tip for any other new traders, if you are under capitalized (< $1000), keep leverage as low as possible, but open a micro account instead (cent account) of a standard account. A standard account with high leverage and under-capitalization is a recipe for disaster. Don't look for excuses to trade more, look for solutions to protect what you have - there is no worse feeling than trading for a year or two and losing it all within one day.


@xgavinc
With all the respect I do not recommend low leverage for small account.
I do recommended to protect account with stop losses instead of leverage.
With low leverage possibility to solve many situations is limited.
Once I wrote topic here where I described it in details.


Yes, it doesn't solve all the problems, however, here you have a trader with a medium to long term outlook (sounds like more to do with investing than trading), what I'm trying to attempt is for this trader to be able to sleep at night, the higher the leverage the quicker a negative move makes an impact. At a high leverage, low capitalization and what seems to be a standard account, he can experience a ok position before going to bed to margin call during sleep. That is the point I'm trying to get through, it's advice, whatever other measures the trader implements to protect capital is up to them, but why patch an already bleak outlook... 1. he is under capitalized, 2. for a standard lot account (fix that and leverage becomes less of an issue).

I have $100, my first plan would be a cent account, then I will think of leverage. Would you seriously take $100, standard account at 1:500+ leverage? I can't believe the great vontogr would do that 😁


My point is that leverage does limit risk but it limit profit as well.
So I recommend to limit risk via SL
and use high leverage to generate higher profit.

vontogr (togr)
Dec 08 2016 at 09:21
4862 Posts
xgavinc posted:
togr posted:
xgavinc posted:
As an added tip for any other new traders, if you are under capitalized (< $1000), keep leverage as low as possible, but open a micro account instead (cent account) of a standard account. A standard account with high leverage and under-capitalization is a recipe for disaster. Don't look for excuses to trade more, look for solutions to protect what you have - there is no worse feeling than trading for a year or two and losing it all within one day.


@xgavinc
With all the respect I do not recommend low leverage for small account.
I do recommended to protect account with stop losses instead of leverage.
With low leverage possibility to solve many situations is limited.
Once I wrote topic here where I described it in details.


Yes, it doesn't solve all the problems, however, here you have a trader with a medium to long term outlook (sounds like more to do with investing than trading), what I'm trying to attempt is for this trader to be able to sleep at night, the higher the leverage the quicker a negative move makes an impact. At a high leverage, low capitalization and what seems to be a standard account, he can experience a ok position before going to bed to margin call during sleep. That is the point I'm trying to get through, it's advice, whatever other measures the trader implements to protect capital is up to them, but why patch an already bleak outlook... 1. he is under capitalized, 2. for a standard lot account (fix that and leverage becomes less of an issue).

I have $100, my first plan would be a cent account, then I will think of leverage. Would you seriously take $100, standard account at 1:500+ leverage? I can't believe the great vontogr would do that 😁

@xgavinc
details here https://www.myfxbook.com/community/experienced-traders/low-leverage-is-dangerous-why/1194634,1

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