FX Margin

C2
1

I’ve been trawling the past forum posts to try and find a formula for fx margin calculation but haven’t been able to find it.



I understand that Buying Power is calculated by the following



Buying Power = Cash + Equity - Margined



but what then is the formula for Equity and also for Margined? (I guess Margined is the sum total for individual positions but then what is the fx margin formula for an individual position?)



Thanks.

2

Yup, been wondering that myself…whats the leverage?

3

I’d like to know too. I can get 100:1 at Mbtrading and that seems standard. What does InteractiveBrokers offer? Does your fx engine also handle roll overs? Do you support micro lots?

4

Mathew, btw I know you said lot size is 10k but wanted to know if fractional lots were supported. Thanks.

5

Okay, several answers:



1) C2 doesn’t support fractional lots. Lots are in integers and on the C2 model account, 1 lot = 10,000 currency units. You can trade 1, or 2, or 3 of these 10,000-unit lots – but not 1.5.



2) When you open a position in C2’s model account, we allow 33:1 leverage for forex. But of course you or your autotraders can trade this at much higher leverage in your real-life account – indeed, whatever leverage you want (and your broker allows). The implication of trading with more leverage is that while on C2 you need a lot of cash to hold open a given position, in your real-life account you will need less cash.



3) When I say we allow 33:1 leverage, that implies that you need to “put up as collateral” 3% of the position you hold open. So this answers the first question: how is the “margined” amount calculated for forex positions at C2? The answer is that we automatically treat as “margined” (that is, put up as collateral and not useable to open other positions) 3% of the nominal value of the position you are holding open. Example: If you buy 10,000 EURUSD, you need to put up as collateral 3% of 10,000, or $300.

6

33:1 leverage is about what I was thinking. Keep in mind that your average forex account has 100:1 leverage, so if you see a "margin call" on C2 you will not get liquidated on your retail account (because you have much lower margin requirements)…thus it should not be viewed as a negative if you see a margin call on C2

7

Thanks for the reply. So that’s how the fx margin is calculated. What about the “Equity” figure - how is that calculated?



thanks

8

Steve said -"thus it should not be viewed as a negative if you see a margin call on C2"





Steve - I’ll give you some advice, since I’ve been here over 5 years as a developer. Margin calls are a bad thing if you want subscribers, even if it is just in the C2 account, but not real account. People here stay away from systems they view as reckless, and margin calls is viewed by many as a sign of recklessness.



So, you say margin calls should not be viewed as a negative, but I can tell you potential subscribers don’t share this view.



Good luck,

Kevin

9

Please excuse my bad grammar. It should say "margin calls are…"

10

Do you trade FX?

11

Yes I do trade currencies (not Forex, but futures, since Forex with dealing desks is one big scam IMO), although I’m not sure what I personally trade in my own accounts matters.



I am only trying to help you figure out why people might shy away from from your approach. I’ve watched people here for many years, and chatted with over probably 250 registered members, so I think I know what people here like and dislike.



Kevin

12

[LINKSYSTEM_49375320]

Then you should be aware that typical margin in the US is 100:1. Outside the US the norm is about 400:1. Here it is 33:1. I am used to trading triple the amount I trade here. I am not complaining…after all, isnt a trade that made you money still a good trade…closing by margin or stop seems the same to me. One advantage is to have the trade(s) close when you are down "x" dollars in your account, not pips. Its another way to manage your risk.



Dont hate the system, hate the game.

13

[LINKSYSTEM_49375320]



Kevin, thanks, I appreciate your feedback. Seems like most people here are risk adverse and have experience with equities, which does not allow too much leverage. My experience has been with spot FX, which seems faster paced and uses much more leverage, which can be much more rewarding (on the flip side you can just as easily blow the account if you don’t know what you’re doing).



One thing I will disagree with you about is what you said about the retail desks. Personally, I don’t care who has the other side of my trade. If it’s not a dealing desk it’s a banker at Deutsche. Just gotta know when to hold ‘em and when to fold ‘em

14

Steve - you way try simply reducing your allocation - yes it will impact your returns but it will also reduce your max drawdowns to. Or and in my opinion a better approach start combining your systems with percentage allocations to each based on the results from their out of sample back tests using something like Optimal F or Kelly formula.



http://www.adaptrade.com/Articles/article-ffps.htm



http://www.investopedia.com/articles/trading/04/091504.asp