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Chapter 34, Part I. A Bit More About Leverage. Page 6

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 28, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Usable Margin = Total Equity – Used Margin or

    Usable Margin = Account Balance + Flow Profit – Flow Loss – Used Margin


    Commander in Pips: You’re absolutely right. Also you’ve noted correctly that Total Equity to sum of Account Balance and Flow Profit or Loss. Flow profit or loss is a current result on positions that you hold open currently. Ok, let’s proceed with an example. Then, market has reversed and now it is moving in your favor:


    Account Balance Total Equity Flow Profit/Loss Used Margin 100:1 Usable Margin
    5000 € 5580 € 580 € 1000 € 4580 €

    You see, that market is showing 0.382 retracement and decide to add another 0.5 lot:


    Action Account Balance Total Equity Flow Profit/Loss Used Margin 100:1 Usable Margin
    -5000 € 5580 € 580 € 1000 € 4580 €
    +0.5 Lot
    -5000 € 5580 € 580 € 1500 € 4080 €

    Pipruit:
    Oh, I see that used margin has increased and usable market has decreased correspondingly!

    Commander in Pips: Right. Finally, let’s imagine two different scenarios – market has hit your take profit order and you earn 800 EUR:



    Action Account Balance Total Equity Flow Profit/Loss Used Margin 100:1 Usable Margin
    -5000 € 5800 € 800 € 1500 € 4300 €
    -1.5 Lot
    -5800 € 5800 € - € - € 5800 €

    Pipruit:
    Right, software has automatically closed position by order, flowing profit becomes real and has passed into my account balance. Simultaneously used margin becomes equal zero, since no positions are open currently and usable margin increases by the right at the amount of profit, right?

    Very good.
     
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