Global GT and FXGT have regulations on margin maintenance rate and loss cut. If you don’t know anything about the loss cut, the position will be forced to close suddenly, which is quite disadvantageous for the trader. You should know how to calculate it.
What is loss cut?
Loss cut refers to the point at which the position is closed forcibly. Loss cut, which is said to be the most avoided in FX. Loss cut is a mechanism that is fixed when the margin maintenance rate reaches a certain line so that the trader’s loss does not increase. Therefore, you can see that the loss cut is closely related to the margin maintenance rate. Traders need to operate while avoiding loss cuts.
Margin maintenance rate
The margin maintenance rate is a concept that you absolutely have to know in order to avoid loss cuts. The margin maintenance rate can be obtained by the following calculation.
Margin Maintenance Rate (%) = (Effective Margin ÷ Required Margin) x 100
In Global GT and FXGT, loss cut is triggered when the required margin falls below 20% to 40%. The loss cut level differs depending on the account type. Let’s know the loss cut line of the account type you have now. FXGT’s loss cut line is 20% for mini accounts and standard + accounts, and 40% for professional accounts, ECN accounts, and Crypto Max accounts.
margin requirement
Looking at the above formula, there is a margin requirement. How exactly is this calculated? You can see that it depends on the number of lots and leverage, as well as the exchange rate.
Required Margin = Exchange Rate x Number of Lot ÷ Leverage
Equity
Looking at the above formula, there is something called equity. How exactly is this calculated? The effective margin amount should be added to the margin if there is a profit, and subtracted from the margin if there is a loss. If you have not made an entry, your equity remains the same.
Effective Margin = Margin + Current Profit and Loss
margin call
Also, the word that you should know along with these is margin call. A margin call is a system that informs traders that the margin maintenance rate is approaching the loss cut line. In other words, it is a warning that the loss cut is approaching. If this warning comes, it means that the loss cut is near, so be careful.
Zero cut system
Global GT, FXGT, and even Crypto GT have adopted the zero cut system. Even if the balance becomes negative, it is okay. The zero cut system is a user relief system that returns the negative amount to zero when the account balance becomes negative. Therefore, users have the advantage of being able to trade with peace of mind.
Loss cut avoidance method
Loss cut can be avoided if you want to. What is the best way to do that? We recommend that you do the following:
Additional deposit
By making an additional deposit to the trading account before the loss is cut, it is possible to avoid forced loss cuts, but this can be said to be a life-prolonging measure. Therefore, it is recommended not to make additional deposits if you are caught in a strong trend. Since there is a possibility of forced loss cut before the deposit is reflected, this point must also be considered.
Stop loss before loss cut
In the first place, by cutting the loss before going to the loss cut point, you can escape with a shallow wound. However, if you endure a little more, you may be able to go backwards and make a profit, so the ability to read the flow of the market is the key.
leverage
It is also important to be aware of leverage. Leverage can aim for more profit than the original capital, but it can also be the opposite, and it can be a total loss. It is important to have enough room in your account balance when trading with high leverage.
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