Wiped out in a day

[schmiedelnyc]

I am new to this forum and also to the FX market. There are two issues I would like to hear some comments from you. Is it normal practice that a FX-Dealer (for example Gain Capital) automatically closes all your positions when you are down 75% of your collateral. I thought you would first get a call whether or not you are willing to send in some more money before they liquidate your positions, what I was about to do. I do not see the risk for them when I can still lose 25% from my money. I was heavily short EUR/USD around 1.0905 and got smashed by the moves last Thursday and Friday. I guess it wasn't the best risk management practice but I still believe that the dollar will get stronger in the next couple of weeks, which was the reason that I would have added capital to my account if I had been given the chance. For helpful comments thank you very much.



Tom

 

[H2O]

Trading rule number 1 :

- Never add to a losing position / never answer a margin call.

Thank your broker he got you out

 

[izeickl]

Quote from schmiedelnyc:

I am new to this forum and also to the FX market. There are two issues I would like to hear some comments from you. Is it normal practice that a FX-Dealer (for example Gain Capital) automatically closes all your positions when you are down 75% of your collateral. I thought you would first get a call whether or not you are willing to send in some more money before they liquidate your positions, what I was about to do. I do not see the risk for them when I can still lose 25% from my money. I was heavily short EUR/USD around 1.0905 and got smashed by the moves last Thursday and Friday. I guess it wasn't the best risk management practice but I still believe that the dollar will get stronger in the next couple of weeks, which was the reason that I would have added capital to my account if I had been given the chance. For helpful comments thank you very much.



Tom

Thing is how long would adding funds take, a wire transaction? Day/two? You could easy just lose that other 25% before the extra funds get there.
You also mention you belive the dollar will get stronger in the next couple of weeks, how far are you prepared for it to get -Weaker-? It could drop another couple of hundred points and you lose all your funds again.

Im hoping that you were playing minis and that wipeing out an account was a small account. After a 2/3% loss you should have cut losses then my friend. A number of people on another forum got caught by the rapid move and one in particular pushed their stop loss further and further....eventually cut losses and had a heavy draw down. This big move down for the past couple of months is still just a small retracement in a overall dollar bear trend that has been going for ~2 years now, this could mark of the resumption of the longer term trend ( a bounce off of the 50week SMA) in which case, be thankful they closed you out before you got more funds in and the dollar weakness continues.

How much leverage had you taken out?

In regards to your Q however, yes it is normal for them to just close either all of your positions, or close them one at a time freeing up margin.

 

[Lobster]

Quote from H2O:

Trading rule number 1 :

- Never add to a losing position / never answer a margin call.

Thank your broker he got you out

I concur. Besides, if anything, I would consider going long the Euro right now.

 

[harrytrader]

That's the usual way newbies get wiped out. Now you know.

Quote from schmiedelnyc:

I am new to this forum and also to the FX market. There are two issues I would like to hear some comments from you. Is it normal practice that a FX-Dealer (for example Gain Capital) automatically closes all your positions when you are down 75% of your collateral. I thought you would first get a call whether or not you are willing to send in some more money before they liquidate your positions, what I was about to do. I do not see the risk for them when I can still lose 25% from my money. I was heavily short EUR/USD around 1.0905 and got smashed by the moves last Thursday and Friday. I guess it wasn't the best risk management practice but I still believe that the dollar will get stronger in the next couple of weeks, which was the reason that I would have added capital to my account if I had been given the chance. For helpful comments thank you very much.



Tom

 

[Free Thinker]

Quote from schmiedelnyc:

I am new to this forum and also to the FX market. There are two issues I would like to hear some comments from you. Is it normal practice that a FX-Dealer (for example Gain Capital) automatically closes all your positions when you are down 75% of your collateral. I thought you would first get a call whether or not you are willing to send in some more money before they liquidate your positions, what I was about to do. I do not see the risk for them when I can still lose 25% from my money. I was heavily short EUR/USD around 1.0905 and got smashed by the moves last Thursday and Friday. I guess it wasn't the best risk management practice but I still believe that the dollar will get stronger in the next couple of weeks, which was the reason that I would have added capital to my account if I had been given the chance. For helpful comments thank you very much.



Tom

i think you just got an education that may be the best thing for you. it could save you from a bigger disaster in the future.it always amazes me that people think they can play in markets they know nothing about. you said you were new to fx trading and then you said "I was heavily short EUR/USD around 1.0905 and got smashed by the moves last Thursday and Friday. I guess it wasn't the best risk management practice but I still believe that the dollar will get stronger in the next couple of weeks, which was the reason that I would have added capital to my account if I had been given the chance.". do you know how leveraged the fx is? you cant fight the market on a heavily leveraged instrument like fx unless you have deep pockets the size of george soros. it will eat you alive. i think most people are better off staying away from the currency markets altogether. the learning curve can be painful.

 

[cable]

Quote from schmiedelnyc:

I am new to this forum and also to the FX market.

If you're new to Forex, you HAVE to get in slow. The rules that worked for you in equities don't always work with currencies. If you're down 75% already then you'd better STOP completely, get yourself a demo account, and paper trade until you have a solid system worked out. You've gotta be in it for the "long haul" or YOU'RE DEAD MEAT. Forex isn't a get-rich quick scheme, it's a get-poor quick scheme.

 

[ramora]

Quote from schmiedelnyc:

I do not see the risk for them when I can still lose 25% from my money. I was heavily short EUR/USD around 1.0905 and got smashed by the moves last Thursday and Friday.



Tom

Tom,

1. I wonder if you read any of the paperwork you signed when you opened the account...

2. The President of the United States will speak to the world at 8 p.m. EST Sunday evening. I doubt he has any good news to share with the world on the war against terrorism. By Monday afternoon, you may be glad that your positions were closed and you did not add more money to the account.

3. Even without the POTUS statement the market has been looking very toppy after a long runup. If equities tank or even pull-back short term it will boost the Euro and Yen.

4. Phone calls are reserved for the really bad news....

Better luck with your next position.

ramora

 

[Ken_DTU]

the trend is your friend.

keep small stops.



basic, but still right!

 

[Girlpower]

I'm pretty new to FX trading too. I've had a couple of trades only - one winner one loser so far - net positive though. (I had hedged currencies before due to necessities of my normal account and the markets I trade and the currency risk involved.)

I'm finding my slowly into this new market for me. The thought of 75% loss scares me senseless, and my money management wouldn't even begin to allow anything like that. I'm amazed that you would be prepared to further fund such a losing position instead of reading what the market is telling you...

I guess you just got a real baptism into trading, and I echo what has been said before - I think your broker just did you a favour and that you have just learned a huge lesson (if you look carefully at it) about ALL types of trading... (I hope so anyway)

Kind regards

Natalie