# PLEASE I need a quick clarification about margin!

338

For example I have a leveraged account with \$10,000 balance.

I open a position of 1 Lot requiring margin of \$1000.

Free Margin is now \$9000.

Market moves against me and my trade is losing \$9000, I get a margin call and the trade is automatically closed.

My question:

In the above scenario does the used margin now get released (because the position has been closed) and so now my account balance is \$1000?

Or does the used margin participate in the trade? i.e. the market can keep going against me for \$1000 more before the order is closed (so I lose all \$10,000), but just that I can't open any new positions for lack of free margin?

Thanks!

168

With 1.000\$ you don't have a margin of 9.000\$

My understanding of margin and leverage is as follows:

200:1 leverage -> 0.5% margin

If you want to trade an 100.000\$ account, then you need to provide at least 2.000\$ to shift the 100.000\$ of the broker.

You get a margin call, once your trade goes against you and you lose your 2.000\$ (The cash you have). The margin call depends on your account size not the leverage.

Therefore I would never open an account with an leverage beyond 200:1. 100:1 or 50:1 would be better. You need to provide a higher margin and thus have more own capital to trade. More own capital doesn't mean that you won't run into a margin call but it makes the situation less stressing.

168

To be more specific:

Your broker offers an account with a leverage of 50:1 and a minimum cash in of 300 USD.

Calculus: 1/50 * 100 = 2% -> 0.02

Means, you need to provide 2% of the capital to shift a leverage of 50:1. Say the broker likes you to provide 300 USD for a small account. Then the highest you can move is 15.000 USD.

Calculus:

15.000 USD * 0.02 = 300 USD

35

To actually answer the question, yes, once you encounter a margin call and you lose the \$9,000 the margin of \$1,000 which was 'tied up' with the broker will be released back into your account.