How can we save our account from margin call? - page 3

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We can save our account from margin call if we can minimize the risk. We also must have good skills to make our funds be more maximal in forex trading. So before we trade in forex, we must learn first and understand the basics of trading, including manage funds and analyze market.

 

The use of money management and risk management is vital.. Also the proper use of leverage is also need to prevent crash of account and saves you from maximum loss leading to margin call.

 

Use stop losses and MM

 

Trader must learn how to manage funds since we use demo account. We can make demo account to hone trading skills, both analyzing skills, management skills and also controlling skill although real account is better. We can try to use $10 in if we want to try improve trading skills and get more maximal result here.

 
Ray Cooper:
I see, over trading with over lots size is our main problem. Therefore, now I am very sincere about my trading lots size.

That us called money management, If you underestimate the risk, there you go.

 

Handling Margin Calls Margin Calls When a client’s equity balance falls below the maintenance margin, a margin call amount equivalent to the difference between the maintenance margin and the equity balance must be made. The client has two business days to top up if the amount is <20% and one business day if the amount is <5%.

Margin calls are calculated based on the previous trading day’s closing prices. For example, Client M has the habit of looking at the Phillip CFD Account Management Page every morning before commencing to trade. He notices that there is a margin call amount on Tuesday (Day 1 Margin Call), which was based on Monday’s closing prices.

Client M can choose to pay the margin call amount as notified by his Trading Representative on Tuesday by one of the following options:

  • Cash or cheque at Phillip Securities Head Office’s cashier counter
  • Transfer funds from his stocks trading account
  • Send an Electronic Payment for Shares (EPS) from his bank account
  • Liquidate sufficient CFD contracts to fulfill the margin call.

    • He can also choose to pay on Wednesday (Day 2 Margin Call) by 3pm, but the amount might have increased or decreased, so he needs to verify the accurate on Day 2. Payment options on Day 2 are limited to one of the following:

    • Cash or cheque at Phillip Securities Head Office’s cashier counter before 3pm
    • Funds transfer from his stocks trading account before 10am
    • Liquidate sufficient CFD contracts

      • Failing which, he will face force-liquidation, which involves Phillip CFD liquidating sufficient CFD contracts to fulfill the margin call.

      Margin Call Example on Singapore Stocks CFD

      Initial Deposit = S$5,000 cash

      [First Day]

      BUY 2 lots of Share A @ $7.000, and Share A closed @ $7.050

      • Opening commission = Comm. x QtyA x Opening PriceA x GST = 0.3% ´ 2,000 ´ 7.000 ´ 1.07 (incl GST) = 44.94
      • Finance Charge = QtyA x Day End priceA x FC p.a./ 365 days x 1 day = 2,000 ´ 7.00 x 5 5.5% ¸ 365 ´ 1 = 2.12
      • Unrealized Profit/Loss (mark-to-market at day end) = (Day End priceA – Opening PriceA) x QtyA = (7.050 – 7.000) ´ 2,000 = 100
      • Maintenance Margin = QtyA x Day End PriceA x 20% = 2,000 x 7.050 ´ 20% = 2,820
      • Equity Balance = Cash deposits – Opening commissionA – FCA + Profit/LossesA = 5,000 – 44.94 – 2.12 + 100 = 5,052.94
      • Available Balance = Equity Balance – Maintenance MarginA = 5,052.95 – 2,820 =2,232.94

      [Second Day]

      SELL 3 lots of Share B @ $3.300, and Share B closed @ $3.300

    • Opening commission = Comm. x QtyB x Purchase PriceB x GST = 0.3% ´ 3,000 ´ 3.300 ´ 1.07 (incl GST) = 31.78
    • Finance Charge for Share B = QtyB x Day End priceB x FC p.a./ 365 days x 1 day = 3,000 ´ 3.300 x 8% ¸ 365 ´ 1 ´ = 2.17
    • Unrealized Profit/Loss (mark-to-market at day end) = (Day EndB – Opening PriceB) x QtyB = (3.300 – 3.300) ´ 3,000 = 0
    • Share A closed @ $6.500
    • Finance Charge for Share A = FCA for Day 1 + FCA for Day 2 = 2.12 + [QtyA x Day End priceA x FC p.a./ 365 days x 1 day] = 2.12 + [2,000 ´ 6.500 x 5.5% ¸ 365 ´ 1 ] = 2.12 + 1.96 = 4.08
    • Unrealized Profit/Loss (mark-to-market at day end) = (Day End priceA – Opening PriceA) x QtyA = (7.000 – 6.500) ´ 2,000 = 1,000
    • Maintenance Margin = (QtyA x Day End PriceA x 20%) + (QtyB x Day End PriceB x 20%) = (2,000 x 6.500 ´ 20%) + (3,000 x 3.300 ´ 20%) = 4,580
    • Equity Balance = Cash deposits – Opening commission A – FC A – Opening comm B – FC B – Unrealised Profits/Loss = 5,000 – 44.94 – 4.08 – 31.78 – 2.17 – 1,000 = 3,916.89
    • Available Balance = 0 (Maintenance Margin > Equity Balance)

    Margin Deficit (Amount to top up for Margin Call) = Maintenance Margin – Equity Balance = 4,580 – 3,916.89 = 662.97

    EQUITY BALANCE < 20% MARKET VALUE This is a margin call situation. Including the call day, client has 2 business days to top up the Margin Deficit.

    [Third Day]

    When prices change drastically, client may face a Force-selling Call.

  • Share A closed @ $5.850
  • Finance Charge for Share A = FCA for Day 1 + FCA for Day 2 + FCA for Day 3 = 2.12 + 1.96 + [QtyA x Closing priceA x FC p.a./ 365 days x 1 day] = 2,000 x 7.000 x 5.5% ¸ 365 ´ 1 = 2.12 + 1.96 + 1.76 = 5.84
  • Share B closed @ $4.120
  • Finance Charge for Share B = FCB for Day 2 + FCB for Day 3 = 2.17 + [QtyB x Day End priceB x FC p.a./ 365 days x 1 day] = 2.17 + [3,000 ´ 3.300 x 8% ¸ 365] = 7.05
  • Unrealized Profit/Loss (mark-to-market at day end) = [(Day End priceA – Opening PriceA) x QtyA]+ [(Day End priceB – Opening PriceB) x QtyB]= [(7.000 – 5.850) ´ 2,000] + [(4.120 – 3.300)] ´ 3,000] = 2,300 + 2,460 = 4,760
  • Maintenance Margin = (QtyA x Day End PriceA x 20%) + (QtyB x Day End PriceB x 20%) = (2,000 x 5.850 ´ 20%) + (3,000 x 4.120 ´ 3,000 x 20%) = 4,812
  • Equity Balance = Cash Deposits – Opening CommissionA – FCA – Opening CommissionB – Unrealised Profit/Loss – 5000 – 44.94 – 5.84 – 2,300 – 31.78 – 4.88 – 2,460 = 152.56
  • Available Balance = 0 (Maintenance Margin > Equity Balance)
  • Margin Deficit (Amount to top up for Margin Call) = Maintenance Margin – Equity Balance = 4,812 – 152.56 = 4,659.44

EQUITY BALANCE < 5% MARKET VALUE This is a Force-selling Call, and client has 1 business day, which is the call day itself to top up the Margin Deficit.

Handling Margin Calls | CFDs | CFD Trading Singapore | Phillip CFD

 
Melle:
Do you have an idea on how to save our account when it is less than 75% or 50% if we forgot to set S/L? Is it possible to recover our account? Do you have any other way of saving it?

Use low leverage or even 1:1 .

 
winters:
Use low leverage or even 1:1 .

If we use leverage 1:1, we will need more capital for trading in forex. I think, retail trader will not use that leverage. We prefer use higher leverage. And i use 1:500 to trade in forex. And it's enough although we use small amount

 
CahCuncun:
If we use leverage 1:1, we will need more capital for trading in forex. I think, retail trader will not use that leverage. We prefer use higher leverage. And i use 1:500 to trade in forex. And it's enough although we use small amount

Professional traders and institutions use 1:8 maximum

1:500 is gambling and (in almost all cases) a trading suicide

 

Reduce the leverage you trade with; trade with cents if your capital is less than 500 and have a good trading system.

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