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Margin calls and avoiding them

Discussion in 'Forex and Cryptocurrencies' started by bogan00, May 15, 2018.

  1. bogan00

    bogan00

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    Hope everyone is having a great night,.
    I am starting to learn about forex but i know the difficulties with margin calls

    With margin calls: say if i deposit $1000 and leverage 1:100
    (i know it is a stupid thing to do)
    So if i go ahead and buy 1 unit ($100,000).
    Thus my margin used would be 100,000/100=1000
    so already in margin call i assume.

    However if i add 4,000 of my own money prior to buying 1 unit- then my total equity would be 1000+4000=5000 thus avoiding a margin call whilst still being able to buy 100,000

    is this allowed/this how it works?

    (hypotethical question- of course im not going to go ahead do this ...maybe ha)
     
  2. tech/a

    tech/a No Ordinary Duck

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    Yes
    Margin is there to protect the broker from your potential losses

    Leveraged products leverage your risk
    Make sure you understand it
     
  3. trading@riat

    trading@riat

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    Well said, margin calls are also made by broker to protect him from your potential losses.
     
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