FX and metals are traded on margin which means you can undertake transactions having an economic exposure multiple times your deposit size. The ability to do this is known as leverage which can substantially magnify the size of your loss but may also increase your profit for any given price change of the underlying currency pair. TradeFX grants you a trading line which sets a maximum currency exposure for your account. We calculate it by multiplying your equity by your leverage factor (up to 100 times, in the normal course). The default maximum initial leverage for regular trading hours is 200:1, permitting you to gain exposure up to a 200 times the amount of your equity. We may at our discretion consider different limits in specific cases, upon request. We have discretion to reduce leverage to (e.g. 50:1 or 20:1) which we, for example, consider such change to be prudent, taking into account current macro-economic conditions, volatility and market stress and/or relevant political or financial events or news announcements.
Minimum margin requirement
Minimum margin levels are set to protect you from the risk of loss in excess of your equity and TradeFX’s associated liquidity position as follows:
- An individual self-trade account, a minimum Equity of £200.00 is required.
- For accounts with different base currency the minimum amount of equity is calculated at the exchange rate as of the latest settlement.
- All open positions may be closed and the account blocked if the Equity reaches below the minimum margin requirement.
The minimum margin required to open a position depends on the desired leverage, currency pair and current market prices. If equity for a self-trade account falls below GBP500.00 or equivalent in foreign currency, the account may be automatically blocked by the trading risk management system.
Margin call and margin cut
Margin Call means a situation where the margin requirements do not allow you to increase exposure on your account. You may only execute trades to reduce exposure, by closing or hedging the existing net positions. Despite the margin call level being reached, the positions will not be closed automatically. The automated system then cancels all placed bid/offer orders that can increase the exposure.
Margin cut or cut-off level occurs if the use of leverage reaches or exceeds 200%, TradeFX has the right (but not the obligation) to fully or partially reduce your exposure by closing existing positions and/or by opening new positions in the opposite direction. In the normal course, the system automatically reduces exposure so that the use of leverage is brought down to approximately 100%. However, you can select to fully close all open positions in case of a margin cut.