Leverage for martingale
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I want leverage 1:400, demo ok, but live only 200?
Why?
mail from ibfx
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Your live account is a mini account and we don’t change the leverage of mini accounts because at 200:1 you are offered the same margin call stop out level as 400:1. Se explanation below and if you have further questions please let me know.
I have received your request to change the leverage on your account to a higher than normal level. Currently on mini accounts the regular leverage is 200:1 and on standard accounts it is 100:1. We normally do not offer higher leverage than the regular settings unless you are specifically trading an approved qualified system.
At 400:1 it is easy to over leverage an account and end up with a margin call in a short time period. What we have done for our mini accounts at the normal 200:1 leverage is added the drawdown buffer that a 400:1 account offers. How we do this is on accounts with a leverage of 200:1 or less we have reduced the margin call stop out level (the point where trades are automatically closed) to 50% of required margin. The normal margin call stop out level for leverage above 200:1 is at 100% of required margin. This benefit allows the drawdown buffer of a 400:1 account without the added risk that would come from trading too much of the available margin. Below is an example.
Example:
10 mini lots traded at 200:1 requires $500 in margin and would close orders from a margin call when account equity goes below $250 (which is 1/2 of the $500 required margin).
10 mini lots traded at 400:1 requires $250 in margin and would close orders from a margin call when account equity goes below $250.
As you see even though the required margin is less at 400:1, the point where trades get closed due to a margin call is the same at $250. If you are trading a standard account the same 50% margin stop out level would apply but it would be figured at a 100:1 leverage.