Margin is a term given to the level of collateral used to cover the credit risks resulting from your trades. Margin is shown as a percentage of the size of the position (i.e.10% or 1%), and the reason that your trading account contains any funds at all is to make sure that you always have adequate margin. For example, a 5% margin on a $500,000 position means that you will need to have $25,000 in your account.
The margin you keep in your trading account will need to be greater than or equal to 100% so that you can open new trades, unless these new trades will mean that your trading account is fully hedged.
The scale of leverage available to choose from runs from 1:1 to 500:1, depending on the account type you open at Investex. Margin requirements stay the same through out the week, and they do not become wider at weekends or overnight. Also, Investex lets you raise or lower your leverage ratio as needed.
At Investex, you can keep control of your risk exposure in real time, by keeping track of your free and used margins.
Putting your free and used margins together gives you your equity. Your used margin is the money you must deposit to hold a trade (for example, if your account leverage is 100:1, the margin you will need to set aside will be 1% of the trade size), and free margin is how much money you have remaining in your trading account. This can fluctuate in line with your account equity. You can use it to open more positions or soak up any losses.
The equity level that your open positions reach where they will be closed automatically is known as the stop-out level. The Investex accounts' stop out levels are: for Classic - 20%, for Pro/Bank - 40 %.
Leverage lets you trade with more money than you have in your trading account, and it’s shown as a ratio, such as 500:1, 100:1, or 50:1. So, if there is $1,000 in your trading account and the ticket sizes you trade are 400,000 USD/JPY, this means that your leverage will be 400:1.
How can you trade 400 times more than you have available? At Investex, we offer a free credit allowance on a short-term basis for you to use each time you trade on margin, so you can buy more than your account value is currently worth. Without this allowance, your limit for buying and selling tickets would be just $1,000.
The advantage of using leverage is that even a modest initial investment can allow you to generate considerable profits. Of course, the disadvantage is that your losses can also be considerable. This is why it is important to manage your risks adequately.
Investex offers youa leverage range that gives you plenty of scope to choose the level of risk that you prefer. That said, we would advise against trading close to a leverage of 500:1, as the risk it involves is high
Each client assumes full responsibility for the monitoring of the activity in their trading account, but additionally, Investex follows a margin call policy. This guarantees that your maximum possible risk is never greater than your account equity.
When your account equity drops below 50% of the margin you need to maintain your open positions, we will try to alert you with a margin call warning, so you are aware that you don’t have adequate equity to support your open positions.
If you have primarily been a telephone trader, and we believe that you are unable to sustain your open positions, our dealers may give you a margin call. They will advise you to place enough money in your account to sustain your open positions.