IBFX, being one of the most transparent brokers out there, is making blog posts almost on a daily basis giving detailed explanations of their services. One thing that should become much more interesting to investors, following the proposed 1:10 leverage requirements, is margin calls. Jeffrey Nuttall, IBFX’s trading specialist, gives an overview of how margin call works on IBFX’s platform.
IBFX Forex margin calls are significantly different than margin calls in other markets. We do not call our clients to warn them their equity has fallen to dangerously low levels. The leveraged nature of Forex trading does not allow time for a traditional margin call.
Accounts trading with 100:1 margin levels are subject to a margin call when the equity in the account is equal to or lower than 50% of the margin posted. Once this unfortunate situation occurs the Interbank FX trader 4 platform closes trades automatically. Trades are closed in order beginning with the largest loss trades are closed until the equity in the account exceeds the 50% threshold.
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IBFX ‘s margin call policy is in place for the protection of our clients. Margin calls are made with the intent of preventing a client’s account from falling into a negative balance situation. Our margin call policy does not eliminate the potential risk that losses will exceed the amount of the deposit. Margin calls are merely our attempt to prevent such unfortunate situations.
The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin call within the time prescribed, your position will be liquidated and you will be responsible for any resulting losses.
Trading in the off-exchange retail foreign currency market is one of the riskiest forms of investment available. Our complete risk disclaimer can be found here: http://www.ibfx.com/Legal/RiskWarning.aspx