LOST $14 k for 0.01 USDCHF LOT SIZE .Please help !

vinabao posted:
Hello ,
I have account with ic market .
about 15 hours ago I had one small open trade 0.01 buy USDCHF .
My account was wipeout completely with -$14552.54 on 0.01 buy USDCHF position .

here is history trade : USUCHF BUY 0.01 -- lost - $14,552.54
open price 1.00211 closed 0.06460

can some one explain to me :

- is it possible to lose more than $1000 when you open 0.01 lot size ?
- if I open 0.01 lot size I would lose $10 every 100 pips ( 1% ) .
if I lost $14 k for 0.01 lot size , how many pips I lost ? 140,000 pips ?? ( 140 thousand pips )
is it from open price 1.00211 closed 0.06460 is 140 k pips ?
I am confusing .
- if look at the history (open price 1.00211 closed 0.06460 )
how much money I should lose accord to those open and closed price of the pair .
…..
I hope IC market will refund my money . This is big scam need to be investigated .
Thank you .

lbst posted:

rodgerhe posted:
Well, just want to clarify that if the position indeed closed at 0.06460 the lost IS ACTUALLY CORRECT. You all forgot the fact that at the time the position closed, the USD/CHF trading at 0.06460 as well. And OP lost 937.51CHF not 937.51USD, which equals to 14,512.54 USD so the trade has nothing wrong with the figures!

Assuming this is CFD trade and not a real foreign exchange trade - I find the fact that your calculation is the same as the loss disturbing.
In a CFD, you are credited (or debited) the difference between the value of the contract at open and the value at close or offset. The underlying provides the price to calculate the value of the CFD. The OP does not lose CHF. Let me explain my understanding and please argue this if you find fault. Let's leave pips and bid/ask spread to simplify this.

The OP buys 1000 units or 0.01 CFD contracts of an underlying instrument (USDCHF) at 1.00211 per unit.
1000 x 1.00211 = $ 1002.11 USD. This is the total value of the contract that the OP has bought. Had he bought anything via a CFD, if the underlying has the same price, that would be the value of the CFD.

Assuming 1:1 leverage, the margin is the whole $ 1002.11.
When the price (theoretically) hits 0.0646, the value of the CFD contract is now 1000 units x 0.0646 price = $ 64.6.

The difference of value is 64.6 - 1002.11 = $ - 937.51.
The OP is debited this amount as per CFD standard. Nothing got to do with CHF. In the mean time before the position is offset, swap is paid as if a real currency borrowing/lending had occurred (in this case you earn USD interest and pay CHF interest).

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Now, the loss shown makes sense if we imagine a real trade involving converting currency and converting it back to offset the transaction. In this case, to profit from a pair trade of USD and CHF if the USD rises in value can only be done by selling the CHF short.

As for a short sale, The OP 'borrows' 1000 CHFs. He would then sell 1000 CHF short in the market and receive $ 1002.11 USD.

At some point the CHF gains (theoretically) massive strength and gets to trade at 0.06460. As the OP now owes someone 1000 CHFs he'd have to buy them back with the $ 1002.11 USD: he can only purchase 1002.11 x 0.06460 = 64.736306 CHF. Quite short.

By having to buy an extra (1000 - 64.73631) = 935.26369 CHFs he has to spends an extra ~14'477.76 USDs.

Let's say, that USDCHF dropped even further to 0.01; the amount of USDs needed to buy back 1000 CHFs would be 100'000. This way risk becomes exponential as USDCHF = 1/CHFUSD.

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The way I understand CFDs (what most retail brokerages provide) is the way I explained in the first paragraph. I'm thinking it works this way for cash instruments, like commodities and equities.

The OP's issue makes me now think that it's no. 2, which is a warning sign for everyone. That means the CFD replicates the effects of an short sale of the quote currency when you long a CFD for an FX pair, and a short sale of the base currency when you short.

This would mean that regardless of contract size the risk is theoretically huge as the exchange rate moves towards the extremes of the inverse curve.

It's very late here so I might make mistakes, I think this is extremely important for FX traders to understand, and my explanations above are as far as I got.
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If the base currency of my trading account is CHF , not USD and buy 0.01 lot USD/CHF and the pair crashes to 0.06460 like above .The maximum loss will be 1000 units of CHF in my account . Am I correct ?

tranle447 posted:
If the base currency of my trading account is CHF , not USD and buy 0.01 lot USD/CHF and the pair crashes to 0.06460 like above .The maximum loss will be 1000 units of CHF in my account . Am I correct ?