When a trader buys (goes long) or sells (goes short) a currency pair, then the value of the currency pair, as an instrument, is initially close to zero. This is because (in the case of a buy) the quote currency is sold to buy an equivalent amount of the base currency. As the market rates fluctuate, however, the value of the currency pair position held will also fluctuate. Thus, if the rate for the currency pair goes down, the trader's long position will lose value and become negative. To ensure that the trader can carry the risk in the case a position results in a loss, banks typically require sufficient collateral to cover those losses. This collateral is typically referred to as margin.

Margin-based trading refers to trading in transaction sizes larger than the funds in the account. By leveraging the funds in the account, traders can take better advantage of small movements in the market to build up profits quickly. Conversely, leveraging one's account to trade in larger transaction sizes can just as easily work against a trader and magnify losses, essentially putting most of the funds in the account at risk.

The Trendoks Trader FX4™ platform supports margin trading, which means you can enter into positions larger than your actual Account Balance. However, Trendoks IMG requires sufficient collateral to ensure that you can cover any losses you might incur on your positions. This collateral is typically referred to as margin. Although there is no minimum margin deposit required to open an Trendoks Trader FX4™ account with Trendoks IMG, the Free Margin in your account will limit the size of the positions you can open and will affect when you receive a margin call. (A margin call is a situation in which the Trendoks Trader FX4 Platform automatically closes all of your open positions and may be necessary to ensure that you cannot lose more than the amount of collateral in your Account.) This document describes what the margin requirements are specifically and when a margin call can occur.

One advantage of margin-based trading is that you can strongly leverage the funds in your account and potentially generate large profits relative to the amount invested. The downside is that you can also potentially incur significant losses in your margin capital very quickly. The term “leverage” is often used to describe the margin requirements. A leverage of 50:1 corresponds to a margin requirement of 2% --- 1 divided by 50 is 0.02 or 2% --- which means then when you wish to open a new position, then you must have 2% of the size of that position available as margin. Another way of saying the same thing:, for each dollar Free Margin you can make a 50 dollar trade.

A 100:1 leverage is the maximum offered by Trendoks IMG. Other companies may offer 200:1, or even 400:1, leverage, but Trendoks IMG believes this is far too risky and can cause you to lose your funds very quickly. You only very rarely find serious professionals trading at that level of leverage. Besides having a leverage of 50:1, Trendoks IMG clients can also cap their leverage to 40:1, 30:1, 20:1, or 10:1. We recommend 20:1 or lower. In any case, NFA requirements require that regardless of the set account leverage, Trendoks IMG cap the leverage on non-major currency pairs to 25:1, corresponding to a margin requirement of 4%. Tables in the Summary above list the major currencies and list the margin requirements for different levels of leverage.

As a trader, you are often faced with the following questions:

• Given my account status, how much margin do I have available?
• Given available margin, how large a trade can I make?
• Given a potential trade size, how much available margin must I have?
• How far away am I from a margin call?

Answers to these questions are provided to you automatically by the Trendoks Trader FX4 Platform. For example,

• The Free Margin field in the Terminal Table of the Trendoks Trader FX4™ user interface tells you how much margin you have available;
• The Buy/Sell window will always tell you the maximum number of units you can trade, given your available margin.
• The Terminal of the User Interface indicates how far away from a margin call you are with the “Margin Level” field. 30% -is a Margin Call level.

The remainder of the document describes how these values are calculated. Unfortunately, describing them precisely can get quite involved, and requires quite a bit of math. We will try to use examples to illustrate the necessary calculations.

The term Equity represents the current value of your account. It includes your account balance as well as all unrealized profit and losses associated with your open positions. If you were to liquidate your account by closing all positions and withdrawing all your funds, then the Equity indicates what that would be.
If you have no open positions, then the Equity is simply equal to your Account Balance. (The Account Balance is equal to all of the funds ever deposited into your Account, minus all of the funds ever withdrawn from your Account, adjusted for interest and any profits or losses that have been realized through trading). The Account Balance is displayed in the “Terminal” section of the Trendoks Trader FX4™ User Interface.

If you have open positions then it gets just a bit more involved. The Equity is equal to your account balance plus/minus any unrealized P/L incurred so far.

PROFIT refers to the profit or loss held in your current open positions. This is equal to the profit or loss that would be realized if all your open positions were to be closed immediately.
Example:
If your account is in USD and you are currently long 10,000 units EUR/USD, which was bought at 0.9136, and the current exchange rate for EUR/USD is 0.9125/27, then that position represents 10,000 x (0.9125 - 0.9136) = 10,000 x (- 0.0011) = - 11, or an unrealized loss of $11 USD.

Your Unrealized P/L continuously fluctuates with the current exchange rates if you have open positions and is displayed in the "Terminal" section of the Trendoks Trader FX4™ user interface.
Equity is the sum of your Account Balance and your Account’s Unrealized P/L. It represents the current value of your Account. The Equity of your Account continuously fluctuates with the current exchange rates if you have open positions and is displayed in the "Terminal" section of the Trendoks Trader FX4™ user interface.

Margin Used is equal to Position Value multiplied by Required Margin, summed up over all open positions. MARGIN is the size of the position (in units) converted from the Base currency of the currency pair in question to your Account currency using the ask rate if the position is long and the bid rate if the position is short.
Example:
You have a USD account and a short open position of 10,000 units EUR/USD.
If the current EUR/USD rate is 0.9134/36, then the EUR/USD Position Amount is equal to (10,000 x 0.9134) = 9,134 USD.
Required Margin depends on the currency pair and the maximum leverage set for your account:

Example:

You have the following open positions: 10,000 long EUR/USD and 20,000 short EUR/CZK.

You have set your maximum leverage to 50:1. Your Account is in USD and the current EUR/USD rate is 0.9134/36

The Position Value of 10,000 EUR/USD long is 10,000 EUR converted to USD, which is equal to 10,000 x 0.9136, or $9,136. The margin requirement forEUR/USD is 2% (when the account maximum leverage is set to 50:1). As a result, the margin required on this EUR/USD position is equal to

$9,136 x 0.02, or $182.72.

The Position Value of 20,000 EUR/CZK short is 20,000 EUR converted to USD, which is equal to 20,000 x 0.9136, or $18,268. The margin requirement for EUR/CZK is 4% (when the account maximum leverage is set to 50:1). As a result, the margin required on this EUR/CZK position is equal to $18,268 x 0.04, or $730.72.

The Position Value of your account is $9,136+$18,268 = 27,404. The Margin Used on your open positions is equal to $913.44.

Example:

Same example as above but with maximum leverage set to 20:1.

The Position Values remain the same, but the margin required is equal to 5% of the Position Value, which is ($9,136 x 0.05) + ($18,268 x 0.05) = $456.80 + $913.40.Hence, the Margin Used on open positions is equal to $1,370.20.

We are finally at the point we can calculate the margin a trader still has available to initiate new trades.
Free Margin is equal to the greater of $0 or “Equity” minus the “Margin Used”. Note that this value continuously fluctuates if you have open positions: the Equity changes with the value of your open positions, and Margin Used changes over time as the exchange rates change. If Free Margin is $0, then you cannot open new positions or increase existing positions.

Example:

If your Equity is equal to $12,000 USD, your maximum leverage is set to 50:1, and:

(a) the Total Position Value is $100,000 USD for a position which is comprised of a Major Currency Pair, then the Free Margin is equal to 12,000 - (0.02 x 100,000) = 12,000 - 2,000 = $10,000 USD. On the other hand, if Equity is equal to $1,990 USD, then the Free Margin is equal to $0, because 1,990 - 2,000 = - 10, which is less than $0.

(b) the Total Position Value is $50,000 USD for a position which is comprised of an Non-Major Currency Pair, then the Free Margin is equal to 12,000 - (0.04 x 50,000) = 12,000 - 2,000 = $10,000 USD. On the other hand, if Equity is equal to $1,990 USD then the Free Margin is equal to $0, because 1,990 - 2,000 = - 10.

(c) the Total Position Value is $150,000 USD, made up of $100,000 USD for a position which is comprised of a Major Currency Pair and $50,000 USD for a position which is comprised of an Non-Major Currency Pair, then the Free Margin is equal to 12,000 – [(0.02 x 100,000) + (0.04 x 50,000)] = 12,000 - 4,000 = $8,000 USD. On the other hand, if account equity is equal to $1,990, then the Free Margin is equal to $0, because 1,990 - 4,000 = - 2,110.
Free Margin is also displayed in the Terminal section of the User Interface.

Calculating the Margin Required to open a new trade is relatively straight forward in most cases. If you are creating a new position or are increasing an existing position, then you can calculate the Margin Required for the new trade as described above. If the Margin Required is less than or equal to the Free Margin, then you are allowed to make the trade. If the Margin Required is greater than the Free Margin, then your order will be rejected, should you submit it. You are always able to execute a trade if it reduces a position of your account. If your trade reverses a position (i.e., goes from long to short, or from short to long), then it is easiest to consider the margin requirements of your positions immediately after executing your order under the assumption your order is successfully executed. If the margin requirements are less than the Equity under that assumption, then you have sufficient margin to make the trade.

Trendoks Trader FX4™ requires that you always have sufficient margin to cover any losses you might incur. As soon as that is no longer the case, then Trendoks Trader FX4™ will automatically close all your open positions using the prevalent market rates at the time of closing so as to prevent further losses from occurring.
Specifically, the Margin Used (i.e., the margin requirement of your open positions) divided by two must always be less than the Equity of your account. If this requirement is not met, then a margin call will occur without warning, and with that margin call, all your open positions will be closed. You are responsible for monitoring your account to see if a margin call may happen. For your convenience, the “Margin Level” field in the Terminal of the User Interface is always set to the Equity divided to Margin Used. The closer this value is to the 30%, also shown in the same table, the closer you are to a margin call.
If you are logged in to Trendoks Trader FX4™, then the system will make an attempt at warning you when the Margin Level comes to within 30%. Please note that in a quickly moving market there may be little time between warnings, or there may not be sufficient time to warn you at all.
It is not a good idea to get a margin call. We suggest that you take proactive measures to prevent getting a margin call on your account. Overall, we recommend that you use a lower level of leverage. This makes a margin call less likely. We strongly encourage you to continuously monitor that status of your Account and to specify a stop-loss order for each open trade in order to limit downside risk. . The stop-loss rate can be specified at the time the trade is issued. A stop-loss order can be added at any time for any open trade. Moreover, the Trendoks Trader FX4™ Platform allows you to change your stop-loss orders at any time to take current market prices into account.
But if you happen to get under pressure by being close to a margin call, the unique features of the Trendoks Trader FX4™ platform allow a simple strategy to prevent margin calls. Because Trendoks Trader FX4 allows you to trade in arbitrary units (as opposed to fixed lots), you can incrementally reduce the size of your positions as you get close to a margin call. For example, every time you get your first Warning, you can reduce the size of all your open positions by 10%. This effectively lowers the amount of margin required, giving you more breathing room. Alternatively, you can close individual positions, also to reduce the amount of margin required. Finally, it is possible to transfer additional funds into your account, although you should be aware that delays in fund transfers could cause the funds to arrive too late.
(Some erroneously believe that Trendoks IMG might benefit from a client getting a margin call. The truth is that Trendoks IMG does not benefit at all. To the contrary. Firstly, Trendoks IMG hedges its exposure for trades made by its clients by making corresponding trades with its third party banks. As a result, if you lose money on your trade through Trendoks IMG, Trendoks IMG loses a corresponding amount to its third party bank. Secondly, traders who lose money have less money to trade with and often stop trading. As a company, Trendoks IMG benefits when its customers trade. The bottom line is that each margin call harms a client and it harms Trendoks IMG.)