Queries/Observations of a noob.

Aug 15, 2012
5
2
13
#1
Hi All,

So I have started a demo account primarily with FXCM (happy for suggestions on better apps etc). There are a few things i find odd with FX trading etc(previously have done stock trading).

1. Balance/Equity in the app. On a demo account you start with 5k which is simple enough. However, as you can see on them image, I have managed to buy 6k of NZD/USD (at 0.68367 and 0.68508), and 1K of USD/CAD (at 1.35549). All of that adds up to more than £5,000 so I shouldn't of been able to allowed to buy that much surely? As in my head I am doing (5k x 0.68367) + (1k x 0.68508) + (1k x1.35549) which comes to more than 5k. Also as an experiment I just started buying even more at 5k and it didn't stop me once. So I found this very odd? As I expected by 5k balance to reduce by the amount I had bought and then tell me a p/l on that trade etc.

So what I actually assume is, I am not actually buying the 5k lots, I am merely taking the risk as if I was. So instead of risk being 1:1 i am essentially making it 1:5 and each pip movement will be exaggerated by 5. Thus the risk increase and you can either lose your money faster or make more profit.

2. 'Usable Margin'. It says my usable margin is around about 98% however, again based off of my thoughts above this should be something very small if not a negative number. So how should I be thinking of this?

I understand these will all be of a mind set. I'm an accountant, so I'm used to seeing debits and credits and seeing one baalnce reduce and one increase etc. However, at this minute in time, nothing is decreasing regardless of what I purchase.

Any help would be helpful, as clearly I still have my accounting head on!

One final query. A lot of apps say, you can lose more equity than you deposit. Surely if you make losses that exceed your balance the positions will all close and it will just be 0 in your account?

Any recommendations on what apps for trading would be greatly appreciated!

thanks,

P.s Understand I sound a complete noob.

Viz.
 

Attachments

Likes: Jason Rogers

Jason Rogers

Well-known member
Jun 17, 2009
2,766
92
58
www.fxcm.com
#2
Hi All,

So I have started a demo account primarily with FXCM (happy for suggestions on better apps etc). There are a few things i find odd with FX trading etc(previously have done stock trading).

1. Balance/Equity in the app. On a demo account you start with 5k which is simple enough. However, as you can see on them image, I have managed to buy 6k of NZD/USD (at 0.68367 and 0.68508), and 1K of USD/CAD (at 1.35549). All of that adds up to more than £5,000 so I shouldn't of been able to allowed to buy that much surely? As in my head I am doing (5k x 0.68367) + (1k x 0.68508) + (1k x1.35549) which comes to more than 5k. Also as an experiment I just started buying even more at 5k and it didn't stop me once. So I found this very odd? As I expected by 5k balance to reduce by the amount I had bought and then tell me a p/l on that trade etc.

So what I actually assume is, I am not actually buying the 5k lots, I am merely taking the risk as if I was. So instead of risk being 1:1 i am essentially making it 1:5 and each pip movement will be exaggerated by 5. Thus the risk increase and you can either lose your money faster or make more profit.

2. 'Usable Margin'. It says my usable margin is around about 98% however, again based off of my thoughts above this should be something very small if not a negative number. So how should I be thinking of this?

I understand these will all be of a mind set. I'm an accountant, so I'm used to seeing debits and credits and seeing one baalnce reduce and one increase etc. However, at this minute in time, nothing is decreasing regardless of what I purchase.

Any help would be helpful, as clearly I still have my accounting head on!

One final query. A lot of apps say, you can lose more equity than you deposit. Surely if you make losses that exceed your balance the positions will all close and it will just be 0 in your account?

Any recommendations on what apps for trading would be greatly appreciated!

thanks,

P.s Understand I sound a complete noob.

Viz.


Hi Viz,

Noob questions are always welcome :smart: . Everyone has been in your position at some point.

You are able to place trades larger than the balance in your account because you are trading on margin. For example, in order to open a trade 1k of GBP/USD, the margin requirement is £20. You can think of the margin requirement as a good faith deposit required to set aside in order to keep the trade open. You would see this amount reflected in the Used Margin column of the Accounts window. The remainder of your account equity is available as Usable Margin to open additional trades or guard against losses.

What would happen if you placed a 10k trade? A 10k trade would require £200 as usable Margin, and you would have approximately £4,800 left as Usable Margin.

The larger the lot size you trade, the greater the potential for profit or losses. For example, a 1k lot trade in GBP/USD would have a pip value of £0.08. Every pip the market moves up or down you will gain or lose £0.08. A 10k lot trade in GBP/USD would have a pip value 10x greater - £0.80. Your profits or losses would accumulate more quickly as the market moves with or against your position.

If the market moves against you and depletes all of the Usable Margin, your account will experience a margin call and all trades will be closed. Any remaining Used Margin (the deposit you set aside to open the trade) will be placed back into your account.

It is possible that you can lose more than you deposit into your account. If the market is volatile, then it could increase the likelihood of this occurring. FXCM UK does however provide forex traders with up to $50,000 of negative balance protection. Please read the Terms of Business for full details.

Jason
 
Jun 8, 2017
19
3
13
#3
I've had demos and live accounts with FXCM, it's old but do love the charting software with tradestation. Limited markets and expensive spreads but a good demo package. IG are better value. Anyway my only comment is re your screenshot don't trade from your phone, you need a decent view area to see the charts and draw all over them :) And later you'll need multiple screens once you get how different markets correlate.
All the best
Tony
 

Jason Rogers

Well-known member
Jun 17, 2009
2,766
92
58
www.fxcm.com
#4
I've had demos and live accounts with FXCM, it's old but do love the charting software with tradestation. Limited markets and expensive spreads but a good demo package. IG are better value. Anyway my only comment is re your screenshot don't trade from your phone, you need a decent view area to see the charts and draw all over them :) And later you'll need multiple screens once you get how different markets correlate.
All the best
Tony
Hi Tony,

Great to hear you love the platform!

Were they any products in particular you found our spreads wider on and any markets in particular you would like to see us add? Any feedback is greatly appreciated to help us improve our services.

Jason
 
Jun 8, 2017
19
3
13
#5
Hi Tony,

Great to hear you love the platform!

Were they any products in particular you found our spreads wider on and any markets in particular you would like to see us add? Any feedback is greatly appreciated to help us improve our services.

Jason
Dear FXCM, most of them but you already know that. Like to see BTC/USD in there, most ppl think that's relevant these days. Re: feedback you could stop changing your holding company name, get yourselves unbanned from the US for murky market making practices and maybe raise a bit more market cap so we don't think you're going under :LOL:
 
Jun 8, 2017
19
3
13
#6
P.S. when you place a trade with FXCM you enter the lot (contract) size but just below it will automatically calculate how much that translates to per pip. £1 per pip £2 etc. If you know where your stop needs to be it's much easier to calculate the correct lot size based on your risk exposure. eg: 1% of £5000 = £50, you need a 50 pip stop so you adjust the lot size untill it gives you £1 per pip.
 

Jason Rogers

Well-known member
Jun 17, 2009
2,766
92
58
www.fxcm.com
#7
Dear FXCM, most of them but you already know that. Like to see BTC/USD in there, most ppl think that's relevant these days. Re: feedback you could stop changing your holding company name, get yourselves unbanned from the US for murky market making practices and maybe raise a bit more market cap so we don't think you're going under :LOL:
We're not going anywhere. We released our monthly metrics yesterday and volume for May was $213 billion.

I appreciate the feedback, and I'll relay it our team. (y)

Jason