![\"Usable](\"https:\/\/bpcdn.co\/images\/2016\/05\/senior-usable-margin000.png\" "\\"Usable")
<\/figure>\n\n\n\nYour Usable Margin will always be equal to \u201cEquity\u201d less \u201cUsed Margin.\u201d<\/p>\n\n\n\n
Usable Margin = Equity \u2013 Used Margin<\/strong><\/p>\n\n\n\n Therefore it is the Equity, NOT the\u00a0Balance\u00a0that is used to determine Usable Margin. Your Equity will also determine if and when a Margin Call is reached.<\/p>\n\n\n\n As long as your Equity is greater than your Used Margin, you will not have a Margin Call.<\/strong><\/p>\n\n\n\n ( Equity > Used Margin ) = NO MARGIN CALL<\/p>\n\n\n\n As soon as your Equity equals or falls below your Used Margin, you will receive a margin call.<\/strong><\/p>\n\n\n\n ( Equity =< Used Margin ) = MARGIN CALL, go back to demo trading!<\/p>\n\n\n\n Let\u2019s assume your margin requirement is 1%<\/strong>. You buy 1 lot of EUR\/USD.<\/p>\n\n\n\n Your Equity remains $10,000.<\/strong> Used Margin is now $100<\/strong> because the margin required in a mini account is $100 per lot. The Usable Margin is now $9,900<\/strong>.<\/p>\n\n\n\n If you were to close out that 1 lot of EUR\/USD (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.<\/p>\n\n\n\n But instead of closing the 1 lot, you (the adrenaline-junkie, chop-socky person that you are) got extremely confident and bought 79 more lots<\/strong> of EUR\/USD for a total of 80 lots of EUR\/USD because that\u2019s just how you roll.<\/p>\n\n\n\n You will still have the same Equity, but your Used Margin will be $8,000<\/strong> (80 lots at $100 margin per lot). And your Usable Margin will now only be $2,000<\/strong>, as shown below:<\/p>\n\n\n\n With this insanely risky position on, you will make a ridiculously large profit if EUR\/USD rises. But this example does not end with such a fairy tale.<\/p>\n\n\n\n Let us paint a horrific picture of a Margin Call that occurs when EUR\/USD falls.<\/p>\n\n\n\n EUR\/USD starts to fall. You are long 80 lots, so you will see your Equity fall along with it.<\/p>\n\n\n\n Your Used Margin will remain at $8,000.<\/p>\n\n\n\n Once your equity drops below $8,000, you will have a Margin Call.<\/p>\n\n\n\n This means that some or all of your 80 lot position will immediately be closed at the current market price.<\/p>\n\n\n\n Assuming you bought all 80 lots at the same price, a Margin Call will trigger if your trade moves 25 pips against you.<\/p>\n\n\n\n 25 PIPS!<\/p>\n\n\n\n Humbug! EUR\/USD can move that much in its sleep!<\/p>\n\n\n\n How did we come up with 25 pips? Well, each pip in a mini lot is worth $1 and you have a position open consisting of 80 freakin\u2019 mini lots. So\u2026<\/p>\n\n\n\n $1\/pip X 80 lots = $80\/pip<\/p>\n\n\n\n If EUR\/USD goes up 1 pip, your equity increases by $80.<\/p>\n\n\n\n If EUR\/USD goes down 1 pip, your equity decreases by $80.<\/p>\n\n\n\n $2,000 Usable Margin divided by $80\/pip = 25 pips<\/p>\n\n\n\n Let\u2019s say you bought 80 lots of EUR\/USD at $1.2000. This is how your account will look if it EUR\/USD drops to $1.1975 or -25 pips.<\/p>\n\n\n\n As you can see, your Usable Margin is now at $0.00 and you will receive a MARGIN CALL!<\/p>\n\n\n\n Of course, you\u2019re a veteran international spy and you\u2019ve faced much bigger calamities.<\/p>\n\n\n\n You\u2019ve got ice in your veins and your heart rate is still 55 bpm.<\/p>\n\n\n\n After the margin call this is how your account will look:<\/p>\n\n\n\n EUR\/USD moves 25 PIPS, or less than .22% ((1.2000 \u2013 1.1975) \/ 1.2000) X 100% and you LOSE $2,000!<\/p>\n\n\n\n You blew 20% of your trading account! (($2,000 loss \/ $10,000 balance)) X 100%<\/p>\n\n\n\n In reality, it\u2019s normal for EUR\/USD to move 25 pips in a couple of seconds during a major economic data release, and definitely that much within a trading day.<\/p>\n\n\n\n Oh, we almost forget\u2026we didn\u2019t even factor in the SPREAD!<\/strong><\/p>\n\n\n\n To simplify the example, we didn\u2019t even factor in the\u00a0spread, but we will now make this example super realistic.<\/p>\n\n\n\n Let\u2019s say the spread for EUR\/USD is 3 pips. This means that EUR\/USD really only has to move 22 pips, NOT 25 pips before a margin call.<\/p>\n\n\n\n Imagine losing $2,000 in 5 seconds?!<\/p>\n\n\n\n This is what could happen if you don\u2019t understand the mechanics of margin and how to use leverage.<\/p>\n\n\n\n The sad fact is that most new traders don\u2019t even open a mini account with $10,000.<\/p>\n\n\n\n Because you had at least $10,000, you were at least able to weather 25 pips before his margin call.<\/p>\n\n\n\n If you only started off with $9,000, you would have only been able to weather a 10 pip drop (including spread) before receiving a margin call. 10 pips!<\/p>\n\n\n\n Assume you are a successful retired British spy who now spends his time trading currencies. You open a mini account and deposit $10,000. When you first log in, you will see the $10,000 in the \u201cEquity\u201d column of your \u201cAccount Information\u201d window. Usable Margin You will also see that the \u201cUsed Margin\u201d is $0.00 and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[814],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9999"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9999"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9999\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9999"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9999"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9999"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"Forex](\"https:\/\/bpcdn.co\/images\/2016\/05\/senior-usable-margin-2.png\" "\\"Forex")
<\/figure>\n\n\n\n![\"10,000](\"https:\/\/bpcdn.co\/images\/2016\/05\/senior-usable-margin-3.png\" "\\"10,000")
<\/figure>\n\n\n\n![\"10,000](\"https:\/\/bpcdn.co\/images\/2016\/05\/senior-usable-margin-4-1.png\" "\\"10,000")
<\/figure>\n\n\n\n![\"10,000](\"https:\/\/bpcdn.co\/images\/2016\/05\/senior-usable-margin-5.png\" "\\"10,000")
<\/figure>\n\n\n\n![\"Margin](\"https:\/\/bpcdn.co\/images\/2016\/05\/senior-overleveraged.png\" "\\"Margin")
<\/figure>\n\n\n\nDo you feel overwhelmed by all this margin jargon? \nCheck out our\u00a0 lessons on\u00a0margin\u00a0in our\u00a0Margin 101 \ncourse\u00a0that breaks it all done nice and gently for \nyou.<\/code><\/pre>\n","protected":false},"excerpt":{"rendered":"