<Last updated 25.04.2020>
Hi! If you are interested in Forex please read carefully the below article that helps you understand the trading account details.
Understanding Account Details
When an account is opened with any broker a client has the following items that he must understand fully before taking any type of trade.
Balance – The amount of money you have in your account when there is no open position. If you deposit $10,000 this will remain unchanged until a position is taken. It is affected by closing positions (realizing Profits/Losses), deposits and withdrawals.
Equity – This is your account balance plus/minus your open Profit/Loss (P/L). Fluctuates based on open positions. When there is no position, open balance and equity are the same!
Margin – Calculated based on leverage. Margin is the amount of money that is secured for a position or trade.
Free Margin – Is the difference between your account equity and the margin of your open positions or simply Free Margin = Equity – Margin.
Margin Level – Is the ratio of equity to margin. In other words: Margin Level = Equity/Margin x 100%
Stop-Out Level –Calculated and implemented by company, ranges from 10% -50% of balance. It Is where deals will begin to be closed automatically because the margin level has fallen below the stop-out level.
This happens when equity decreases by increasing losses or if the client over exposes themselves by opening too many positions which increases their margin.
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