FXCM Micro UK margin cut question

[Ashley37]

Was using this firm to get my feet wet and kick around some small trades. Last night I had a few hundred in my account and felt like taking a gamble prior to the release of the Australian employment report. Went short 25k, which required I believe 125.00 in initial margin (400-1) default setting. Like I said, it was a pure gamble and I was just messing around, so please no comment on the money management, lol.

Long story short, I was dead wrong, the market gapped up immediately on the news release, and my margin call left my account almost at zero. I did not place a stop because I thought that I would be immediately cut when my initial margin was no longer sufficient. Sort of a default stop, but whatever.

What concerns is me is that this also would have happened if I had placed an actual stop market order. I fully realize that the real market never traded at the price points between my entry and the post release gap, but I thought that part of the reason people traded with bucket shops is because you dont have to worry about those sort of things.

It seems to me like if the gap had been 300 pips instead of 88, I could have incurred a neative balance. Either they cut at the point your initial margin is breached, or they don't. Don't really feel like bitching about a few hundred, just want to know for next time, when maybe the money is more.

Well whatever, what do you guys think?

 

[Wallace]

you're ALL wet aren't you ?

i'm not going to find all the relevant pages for you on FXCM's site, nor ask you if
you read your Customer Agreement etc

i will point out that THE major difference between fx and futures trading is OVERLOSS
both industries are regulated in the same way by the same regulators, and as my
broker states: "OANDA’s trading system is designed to automatically liquidate all
open positions if your margin deposit is in jeopardy" account - not trading margin

futures 'overloss' via http://www.ampfutures.com/disclaimer.html
"You may sustain a total loss of initial margin funds and any additional funds
deposited with the firm to maintain your position.
If the market moves against your position or margin levels are increased, you
may be called upon to pay substantial additional funds on short notice to
maintain your position." - repay what you owe
"The placing of certain orders (e.g. "stop-loss" orders, where permitted under
local law, or "stop-limit" orders) which are intended to limit losses to certain
amounts may not be effective because market conditions may make it
impossible to execute such orders." applicable to fx trading

 

[Jason Rogers]

Quote from Ashley37:

Was using this firm to get my feet wet and kick around some small trades. Last night I had a few hundred in my account and felt like taking a gamble prior to the release of the Australian employment report. Went short 25k, which required I believe 125.00 in initial margin (400-1) default setting. Like I said, it was a pure gamble and I was just messing around, so please no comment on the money management, lol.

Long story short, I was dead wrong, the market gapped up immediately on the news release, and my margin call left my account almost at zero. I did not place a stop because I thought that I would be immediately cut when my initial margin was no longer sufficient. Sort of a default stop, but whatever.

What concerns is me is that this also would have happened if I had placed an actual stop market order. I fully realize that the real market never traded at the price points between my entry and the post release gap, but I thought that part of the reason people traded with bucket shops is because you dont have to worry about those sort of things.

It seems to me like if the gap had been 300 pips instead of 88, I could have incurred a neative balance. Either they cut at the point your initial margin is breached, or they don't. Don't really feel like bitching about a few hundred, just want to know for next time, when maybe the money is more.

Well whatever, what do you guys think?

Hi Ashley,

A stop loss order would act the same way since both orders (stop loss and margin call) will execute as At Best market orders. While the margin call gets triggered when account equity falls below the margin requirement, the price at which equity = margin requirement may not be available. In this case, the trades will close at the price at which liquidity is available. The execution risks page on the micro site also has details in the section titled "Margin Calls" http://www.forexmicrolot.com/trading-execution-risks.jsp.

I hope that helps.

Jason

 

[Wallace]

hey Jason, re the link:

"Page Not Found 404 Error
We're sorry, but the page you requested does not exist.
It may have been renamed or moved to a new location."

 

[Ashley37]

Quote from Jason Rogers:

Hi Ashley,

A stop loss order would act the same way since both orders (stop loss and margin call) will execute as At Best market orders. While the margin call gets triggered when account equity falls below the margin requirement, the price at which equity = margin requirement may not be available. In this case, the trades will close at the price at which liquidity is available. The execution risks page on the micro site also has details in the section titled "Margin Calls" http://www.forexmicrolot.com/trading-execution-risks.jsp.

I hope that helps.

Jason

It does help, Jason. Just so I am reading this right, you are saying that the filling of stops, including margin cuts, are sent as market orders and grab the first available liquidity regardless of price. Of course, this is exactly the way real markets work, be they futures, equities, or interbank spot currency trading. Witness the May 6th flash crash, where resting orders combined with a cascading of market orders overwhelmed available liquidity, and sell orders were filled where they could be.

I am not looking to play the blame game or rip on Market Makers, it just seems to me that a major part of the success of these firms on the retail side is their willingness to take some of the catastrophic risk out of trading. For gauranteeing fills and keeping amateur and recreational traders from execution risk, these firms get to deal against there clients, shade spreads, feed different customers varying quotes, and clip them here and there. Seems fair to me.

But now you are stating basically, that you will offer me 400-1 margin. I can say have 1k in my account, put on 200k position with a 40 pip stop, encounter event risk, and be filled at first available liquidity, which we all know could be 200/300 pips away. So tell me Jason, how can you GAURANTEE that I won't have a negative balance. I can't fathom how your answer gibes with a no negative balance claim. Maybe if you put on the front page of your site that "hey, we will give you 400-1, accept your stop, but you might owes us 4 grand if things get dicey" . That would seem more accurate per your explanation.

Once again, not a problem, but why then would I ever pay your spreads if dealing through you has all the negatives of a MM, without eliminating some of the rough of and tumble of a true ECN?

 

[Gcapman]

Dukascopy is the only option for fx trading

 

[Celine]

FXCM = stay away, bucket shop.

 

[Jason Rogers]

Quote from Ashley37:

It does help, Jason. Just so I am reading this right, you are saying that the filling of stops, including margin cuts, are sent as market orders and grab the first available liquidity regardless of price. Of course, this is exactly the way real markets work, be they futures, equities, or interbank spot currency trading. Witness the May 6th flash crash, where resting orders combined with a cascading of market orders overwhelmed available liquidity, and sell orders were filled where they could be.

I am not looking to play the blame game or rip on Market Makers, it just seems to me that a major part of the success of these firms on the retail side is their willingness to take some of the catastrophic risk out of trading. For gauranteeing fills and keeping amateur and recreational traders from execution risk, these firms get to deal against there clients, shade spreads, feed different customers varying quotes, and clip them here and there. Seems fair to me.

Hi Ashley,

FXCM does not hold traders responsible for deficit balances. If your account goes negative, we credit the account back to 0. This is also outlined in the margin call section of the execution link in the previous post.

With NDD execution, every order is being offset with another bank or financial institution. If the price requested is no longer available, FXCM is not going to take on the other side of the trade. The order will either be filled at the next best available price or rejected depending on how the order is setup. All micro accounts were previously executed through the dealing desk, but that is changing to NDD execution as well. Several thousand have already been moved over already, and we anticipate the remainder being moved this summer.

-Jason

 

[millionaire7]

Very nice to know this.

Quote from Jason Rogers:

All micro accounts were previously executed through the dealing desk, but that is changing to NDD execution as well. Several thousand have already been moved over already, and we anticipate the remainder being moved this summer.

-Jason

 

[asiaprop]

"whatever....", "...anyway...." does not get you very far in trading. If you want to find out do not ask for facts on this board, 95% you will end up with idiots giving you wrong advice. Call up your broker and confirm first-hand. Very simple.

Oh, and a piece of advice (you judge whether its part of the 95% or an exception): I would stay far away from FXCM. Rather paper trade until you have amassed sufficient capital to really trade.

Quote from Ashley37:

Was using this firm to get my feet wet and kick around some small trades. Last night I had a few hundred in my account and felt like taking a gamble prior to the release of the Australian employment report. Went short 25k, which required I believe 125.00 in initial margin (400-1) default setting. Like I said, it was a pure gamble and I was just messing around, so please no comment on the money management, lol.

Long story short, I was dead wrong, the market gapped up immediately on the news release, and my margin call left my account almost at zero. I did not place a stop because I thought that I would be immediately cut when my initial margin was no longer sufficient. Sort of a default stop, but whatever.

What concerns is me is that this also would have happened if I had placed an actual stop market order. I fully realize that the real market never traded at the price points between my entry and the post release gap, but I thought that part of the reason people traded with bucket shops is because you dont have to worry about those sort of things.

It seems to me like if the gap had been 300 pips instead of 88, I could have incurred a neative balance. Either they cut at the point your initial margin is breached, or they don't. Don't really feel like bitching about a few hundred, just want to know for next time, when maybe the money is more.

Well whatever, what do you guys think?