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How to reduce risks of margin call with small balance?

xgavinc
Dec 08 2016 at 10:00
235 โพสต์
I understand what you are saying, but I'm inclined to agree with @JacoAF
Specifically his points on over trading.

And you just confirmed what I'm trying to say, 'My point is that leverage does limit risk but it limit profit as well.' - On the account type and capitalization, I lean more (in his case) to limiting risk over increased profits (adversely, increased losses) - the double edged sword.

Long term on a commodity (oil - historically all commodity prices increase), with a bearish outlook (to prevent negative swap) in my view means you have to limit your risk over increased profit.

This kind of reminds me of the cringe worthy adverts, 'open your standard account today with up to 1:3000 leverage with only $5!!!' - and then new traders wonder why they battle so much.

I prefer having a creeping margin call that will last long enough to fund my account, close trades I (not the broker) want to close and examine what went wrong while preserving as much of my equity as possible, than one moment all seems fine and the next moment all my trades are closed out and my balance is zero... just because I decided to take a quick shower / make coffee.

Maybe we disagree because I'm looking at the case of @andromeda1 and you are looking at it in general?

For every loss there should be at least an equal and opposite profit.
vontogr (togr)
Dec 08 2016 at 10:52
4862 โพสต์
xgavinc posted:
I understand what you are saying, but I'm inclined to agree with @JacoAF
Specifically his points on over trading.

And you just confirmed what I'm trying to say, 'My point is that leverage does limit risk but it limit profit as well.' - On the account type and capitalization, I lean more (in his case) to limiting risk over increased profits (adversely, increased losses) - the double edged sword.

Long term on a commodity (oil - historically all commodity prices increase), with a bearish outlook (to prevent negative swap) in my view means you have to limit your risk over increased profit.

This kind of reminds me of the cringe worthy adverts, 'open your standard account today with up to 1:3000 leverage with only $5!!!' - and then new traders wonder why they battle so much.

I prefer having a creeping margin call that will last long enough to fund my account, close trades I (not the broker) want to close and examine what went wrong while preserving as much of my equity as possible, than one moment all seems fine and the next moment all my trades are closed out and my balance is zero... just because I decided to take a quick shower / make coffee.

Maybe we disagree because I'm looking at the case of @andromeda1 and you are looking at it in general?


Well with $100 you cant trade with low leverage.
You can either trade with high leverage or go to cent acc.

vontogr (togr)
Dec 08 2016 at 10:53
4862 โพสต์
xgavinc posted:
I understand what you are saying, but I'm inclined to agree with @JacoAF
Specifically his points on over trading.

And you just confirmed what I'm trying to say, 'My point is that leverage does limit risk but it limit profit as well.' - On the account type and capitalization, I lean more (in his case) to limiting risk over increased profits (adversely, increased losses) - the double edged sword.

Long term on a commodity (oil - historically all commodity prices increase), with a bearish outlook (to prevent negative swap) in my view means you have to limit your risk over increased profit.

This kind of reminds me of the cringe worthy adverts, 'open your standard account today with up to 1:3000 leverage with only $5!!!' - and then new traders wonder why they battle so much.

I prefer having a creeping margin call that will last long enough to fund my account, close trades I (not the broker) want to close and examine what went wrong while preserving as much of my equity as possible, than one moment all seems fine and the next moment all my trades are closed out and my balance is zero... just because I decided to take a quick shower / make coffee.

Maybe we disagree because I'm looking at the case of @andromeda1 and you are looking at it in general?


Let me point it from another angle. What is advantage of low leverage from your point of view?

vontogr (togr)
Dec 08 2016 at 10:56
4862 โพสต์
xgavinc posted:
I understand what you are saying, but I'm inclined to agree with @JacoAF
Specifically his points on over trading.

And you just confirmed what I'm trying to say, 'My point is that leverage does limit risk but it limit profit as well.' - On the account type and capitalization, I lean more (in his case) to limiting risk over increased profits (adversely, increased losses) - the double edged sword.

Long term on a commodity (oil - historically all commodity prices increase), with a bearish outlook (to prevent negative swap) in my view means you have to limit your risk over increased profit.

This kind of reminds me of the cringe worthy adverts, 'open your standard account today with up to 1:3000 leverage with only $5!!!' - and then new traders wonder why they battle so much.

I prefer having a creeping margin call that will last long enough to fund my account, close trades I (not the broker) want to close and examine what went wrong while preserving as much of my equity as possible, than one moment all seems fine and the next moment all my trades are closed out and my balance is zero... just because I decided to take a quick shower / make coffee.

Maybe we disagree because I'm looking at the case of @andromeda1 and you are looking at it in general?


At the end low leverage does not serve you
Check this out
1:50 leverage https://www.myfxbook.com/members/bjgoetze86/A/1241858 - account wiped
1:888 leverage https://www.myfxbook.com/members/3Daimond/cashflow-maker-002/1796864 - account wiped

xgavinc
Dec 08 2016 at 13:18
235 โพสต์
In a low leverage situation closing one order can save the whole account, in high leverage more orders need to close to make up the margin. In the example accounts you give, the 1:888 may have been hit by a margin call and within seconds all orders were closed out automatically, in the 1:50 it would close one order, if market continues to go against account it closes another over minutes. My assumption on the 1:50 is that either a crash happened and the margin level was extremely low to begin with, or the account holder didn't bother refunding the account. The 1:888 might not have even passed the login screen in time to fund the account.

Its the same concept as driving 50mph and 888mph, chance of survival are increased on the lesser of the two.

'You can either trade with high leverage or go to cent acc. ' - I recommended cent account over leverage.

For every loss there should be at least an equal and opposite profit.
xgavinc
Dec 08 2016 at 13:34
235 โพสต์
The 1:888 had a maximum of $1742.73... wiped - Look at the trades! 5 lots, 2 lots, 3 lots... no rocket science on what happened there.

The 1:50 is not sharing, but I picture the same scenario, under capitalized, over traded.

For every loss there should be at least an equal and opposite profit.
Richard Bills (RichardBills)
Dec 08 2016 at 13:57
74 โพสต์
I think we should ask ourselves the initial question - why is leverage used at all? To give us chance to trade more significant volumes with small initial investment that remains blocked as margin. It is common sense that with large volumes at stake comes larger risk of losing but also chance of winning more money.
However, I have the impression from the title of the discussion that margin call is presented as something bad. Sorry if I misunderstood it. Indeed, the margin call is a good thing - it alerts you when you reach a certain level of loss. The lower is your margin requirement, the more money you can lose until you get the margin call and eventually a stop out. So there are 2 setups - riskier (higher leverage, low margin, high loss/profit impact) and less risky (low leverage, high margin, low loss/profit impact). For sure you can wipe your account on both setups but if the leverage is higher, you can achieve a profit/loss faster. I think this is important aspect to consider.
To wrap it up, I think margin call is not the main thing to focus but how to have a stable profit according to your risk tolerance. 😄 If on loosing streak, sometimes it's better to be kicked out of the market sooner but with more money left 😉

xgavinc
Dec 08 2016 at 14:50
235 โพสต์
I think this is a very good article, covers both our views on leverage, arguing over different aspects of the same thing, as explained in the article.

https://www.cfdspy.com/guide/disadvantages-of-leverage.php

For every loss there should be at least an equal and opposite profit.
ElliotCooke
Sep 23 2020 at 19:35
341 โพสต์
Loss is a common issue in forex trading. Many trader4s lose their money everyday. If you want to deal with your losses you have to mawek a good and strong strategy.

ProfitsOnly
forex_trader_[1786937]
Sep 24 2020 at 03:18
142 โพสต์
Use 1:50 if you know you are not discipline to avoid margin calls.

ethan_65
Sep 24 2020 at 09:55
41 โพสต์
In my opinion, the best way to avoid margin calls is to open trades in small lot sizes like micro and mini and monitor your trade carefully. Maintain a solid strategy and stick to it and have a look at the trading signals, find ways to improve your trading. You must be able to get success in avoiding margin calls.

Shelby10
Sep 24 2020 at 19:11
140 โพสต์
to minimize your risks, you can make a good trading plan. You also have proper knowledge to use that plan according to the market situation.

ProfitsOnly
forex_trader_[1786937]
Sep 25 2020 at 01:38
142 โพสต์
Again always make sure you have a lot of margin while trading, I like making huge profits with my margin above 1000% , but sometimes I do let it get to 500% just to make huge and quick profits and exit for the day.

inspirenez
Oct 13 2020 at 06:09
59 โพสต์
lovefortrading (perryjohn765)
Oct 14 2020 at 04:55
238 โพสต์
in order to reduce the risk of margin call, you need to place trades on the small lots like the micro lots 0.01. and particulary you want to avoid the margin call, there are brokers who offer bonus where the there is no margin call and the trades are closed when you lose the deposited amount,

Marloncolingwood
Nov 26 2020 at 10:00
15 โพสต์
You can trade with $100. You just have to make sure that you use low leverage.

Tremblay
Mar 20 2021 at 09:12
330 โพสต์
Making a good plan can help you to deal with the losses.

cameronstanley
Mar 26 2021 at 06:55
18 โพสต์
Tremblay posted:
Making a good plan can help you to deal with the losses.

And one of the biggest mistakes any trader can make is, opening a demo account on any platform and then trading with no strategy in hand, but on the basis of their instincts. While there would be few lucky trades but this sheer luck won’t last long.

Garrychris554
Mar 26 2021 at 07:55
27 โพสต์
@Cameron Yeah simply knowing a trading plan is important won’t do any good. What needs to be in a trading plan is equally important. After demo trading with, forex.com, and ICM, I planned my strategies revolving around firstly when to open a trade, secondly, when to close it, thirdly how to minimize the risk-reward ratio, and lastly percentage of amount at risk per trade.

WaltonCharles
Mar 28 2021 at 19:09
144 โพสต์
Risk management is important in any kind of investment. For trading, trader should take maximum 2% risk of their capital. Survival is only matter in the market.

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