OK, Margin
There are two kind of margins (Now don't get confused already...)
First : Initial margin. This is the margin required when you open your position. If your acct value < this margin you are NOT allowed to open a position.
Second : Maintance margin. This is the margin required DURING the time you hold your position. If your acct value minus your
loss < the maintance margin then your position is automaticly LIQUIDATED AT MARKET !!! (This is dangerous in fast moving or thin markets because you can get a BAD price)
Example :
acct value 2000
Init 1500
Maintance 750
Buy 1 es @ 1000 (Allowed because acct > initial) Market starts to drop market now 976 (loss 1200 (24 * 50)) acct value = 2000 - 1200 = 800 (So far so good)
Now market drops to 974 (loss 1300 (26 * 50)) acct value = 2000 - 1300 = 700. Your brokers computer will automaticly liquidate your position without further notice to you.
Dangerous :
If you have still got working stop orders (which will be executed if market drops below your stop price so you're in a position you don't want) This you can calculate for yourself but it still happens.
Thin markets : At the time of the autoliquidation, market trades at 950 * 975 (Not likely in eMini's but very good possible with other futures) You get liquidated AT MARKET. This will give you a price of 950. (a loss of 25 point > your maintance margin) Your acct value will be - 500 now (2000 - (50 * 50 = 2500)) so you have a dept with your broker !!!
Greetings
There are two kind of margins (Now don't get confused already...)
First : Initial margin. This is the margin required when you open your position. If your acct value < this margin you are NOT allowed to open a position.
Second : Maintance margin. This is the margin required DURING the time you hold your position. If your acct value minus your
loss < the maintance margin then your position is automaticly LIQUIDATED AT MARKET !!! (This is dangerous in fast moving or thin markets because you can get a BAD price)
Example :
acct value 2000
Init 1500
Maintance 750
Buy 1 es @ 1000 (Allowed because acct > initial) Market starts to drop market now 976 (loss 1200 (24 * 50)) acct value = 2000 - 1200 = 800 (So far so good)
Now market drops to 974 (loss 1300 (26 * 50)) acct value = 2000 - 1300 = 700. Your brokers computer will automaticly liquidate your position without further notice to you.
Dangerous :
If you have still got working stop orders (which will be executed if market drops below your stop price so you're in a position you don't want) This you can calculate for yourself but it still happens.
Thin markets : At the time of the autoliquidation, market trades at 950 * 975 (Not likely in eMini's but very good possible with other futures) You get liquidated AT MARKET. This will give you a price of 950. (a loss of 25 point > your maintance margin) Your acct value will be - 500 now (2000 - (50 * 50 = 2500)) so you have a dept with your broker !!!
Greetings
