One of the most used terms in the Forex market, along with terms like leverage, lot, is the margin. Margin is a frequently asked question and is often confused. Margin, which means collateral, is used in the forex market together with different terms. While the amount used when opening a position is called the initial margin (initial margin), we can see how much more we can open the position by looking at the free margin (the free margin).
Margin calculation, in other words margin level, is one of the important points to be considered in the forex market. We find margin level by comparing asset / free margin. When this level reaches below 75%, the margin call-margin call comes in. When the level reaches below 50%, the system automatically closes our positions, starting with the most harmful position. It is not compulsory to provide margin when the margin call warnings are received in Forex markets.
As an example, let’s imagine that we have 5,000 USD in our account and we will do our work using 1/100 leverage. We decided to do 5 lot USDTRY long (long) trading. The initial guarantee for this transaction is 5,000 USD. If this is not the case then the free margin will be 0. If we open this position and we do not like the margins, it is 100%.
Now; If the USDTRY price moves in the opposite direction to the position we opened and the margin reaches 75 percent, we call margin completion, which is called margin call. This means that we should follow our position more closely, because if the margin is below 50% we will automatically close our position by the electronic trading platform MetaTrader4.
Stop out concept in Forex markets; a situation in which a certain percentage of the collateral used remains. In other words, it can be explained as Asset / Used Collateral. To give an example; Suppose we open a position with a 1,000 USD balance and 1,000 start-ups. In this case, our Asset / Used Margin ratio will be 100%. QNB Finansinvest has a stop out level of 50%. In our example above, if our asset, which is $ 1,000, drops to 500 USD, Asset / Used Margin will be 50%, and our most damaged position will automatically stop.