Assume
you have opened a Live Standard FX account, and deposited $10,000.
When you first
login, you will see the 10,000 in the "Equity" column
of your "Account Information" window. You
will also see that the "UsdMr" ('Used Margin') is
"0.00", and that the "UsblMr" ('Usable
Margin' or 'Available Margin') is 10,000, as pictured below:
Your
Usable Margin will always
be equal to Equity less
Used Margin. Therefore
it is the Equity, not the Balance, that is used to determine
Usable Margin and will determine if and when a Margin Call
is reached. As long as your Equity is greater than
your Used Margin, you will not have Margin Call. As
soon as your Equity falls below your Used Margin, you will
receive a margin call.
Now
assume that you buy 2 lots of USD/JPY. Your Equity
remains $10,000. Used Margin
is now $1,000, because the margin requirement in a Standard
Forex account is $500 per lot. Usable
Margin is now $9,000 (Equity less Used Margin,
as pictured below):
If
you were to close out that 2 lots of USD/JPY (by selling it
back) at the same price at which you bought it, your Used
Margin would go back to 0.00 and your Usable Margin would
go back to $10,000. Your Equity would remain unchanged
at 10,000.
But
instead of closing the 2 lots, assume instead that you purchased
16 more lots of USD/JPY, for a total of 18 lots of USD/JPY.
You will now have the same Equity, but your Used Margin will
be $9,000 (18 lots at $500 margin per lot). And your
Usable Margin will now be only $1,000, as shown below:
With
this position on, you will make a large profits if USD/JPY
rises. We will illustrate a Margin Call that occurs
when USD/JPY falls. Assume that USD/JPY starts to fall.
You are long 18 lots, so you will see your Equity fall along
with it. Your Used Margin will remain at $9,000.
Once your equity drops below $9,000, you will have a Margin
Call. This means that some or all of your 18 lot position
will immediately be closed at current market prices.
The closed position will show up in your Reports or History
with the "M" or "MC" code next to it.
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