Margin Monitor in TradeKing Forex is an automated risk management tool that helps traders monitor their account equity, margin requirements, and margin utilization. It calculates the margin level of a trader’s account and alerts them when their account equity falls below a certain threshold. This article will explain what margin is, how it works, and why it is important to monitor it in TradeKing Forex.
What is Margin?
Margin is the amount of money that a trader needs to set aside in their account to open a position in the forex market. It is essentially a deposit that is held by the broker as collateral to cover any potential losses that may occur in the trader’s account. Margin requirements vary from broker to broker and depend on the currency pair being traded, the size of the position, and the leverage used.
For example, if a trader wants to open a position in the EUR/USD currency pair with a lot size of 100,000 units and a leverage of 50:1, they would need to set aside $2,000 in their account as margin. This is calculated as follows:
Margin = (Lot Size x Contract Size) / Leverage
Margin = (100,000 x 0.0001) / 50
Margin = $2,000
If the trader’s position moves against them and their losses exceed the amount of margin in their account, they will receive a margin call from their broker to deposit more funds to cover the losses. If the trader is unable to meet the margin call, their position may be liquidated by the broker.
How Does Margin Monitor Work in TradeKing Forex?
Margin Monitor in TradeKing Forex is designed to help traders manage their margin requirements and avoid margin calls. It constantly monitors the trader’s account equity, margin requirements, and margin utilization to ensure that they have enough margin to cover their positions.
The margin level is calculated as follows:
Margin Level = (Account Equity / Used Margin) x 100%
Account equity is the total value of the trader’s account, including profits and losses. Used margin is the amount of margin that is currently being used to hold open positions.
If the margin level falls below a certain threshold, the trader will receive an alert from Margin Monitor. The default threshold in TradeKing Forex is 100%, meaning that the trader’s account equity is equal to or greater than their used margin. If the margin level falls below 100%, the trader may be at risk of receiving a margin call.
Why is Margin Monitoring Important in TradeKing Forex?
Margin monitoring is crucial for forex traders because it helps them manage their risk and avoid costly margin calls. By keeping an eye on their margin level, traders can ensure that they have enough margin to cover their positions and avoid being forced to close their positions prematurely.
Margin monitoring is particularly important for traders who use high leverage, as they are more susceptible to margin calls if their positions move against them. High leverage amplifies both profits and losses, so it is important to use it wisely and always keep an eye on the margin level.
In addition to helping traders avoid margin calls, margin monitoring can also help them stay within their risk management parameters. By monitoring their margin level, traders can ensure that they are not overtrading or taking on too much risk in their account.
Conclusion
Margin Monitor in TradeKing Forex is a powerful tool that helps traders manage their margin requirements and avoid margin calls. By constantly monitoring their account equity, margin requirements, and margin utilization, Margin Monitor can alert traders when their margin level falls below a certain threshold, allowing them to take action to avoid a margin call.
Margin monitoring is crucial for forex traders who use high leverage, as it can help them manage their risk and stay within their risk management parameters. By using Margin Monitor in TradeKing Forex, traders can trade with confidence, knowing that they have a powerful risk management tool at their disposal.
