Margin Call / Auto-Closeout

Auto-Closeout

To reduce your trading risk, when your trading account’s net equity falls below the auto-closeout threshold, ALL of your open positions and pending orders will be automatically canceled out.

Triggering Condition

Margin Ratio falls below 30%(i.e. below 1.5% margin)
(Margin Ratio = Net Equity ÷ Required Margin × 100)

Example
Assuming net equity is HK$6,000, buy 1 lot of EUR/USD at the exchange rate of 1.08096, and the required margin is HK$4,202.9 (based on the USD/HKD exchange rate of 7.78). When the EUR/USD position falls to 1.01907, the account will suffer a loss of HK$4,815, and the net equity of the account will drop to HK$1,185. At this time, when the system monitors* that the margin ratio drops below 30%, auto-closeout will be triggered.

The calculation formula for this example is as follows:

Margin ratio = net equity ÷ required margin × 100
29.9 = (6,000+ floating profit and loss) ÷ required margin × 100
29.9 = (6,000 + (1.01907-1.08096) x 10000 x 7.78 )÷(1.01907 x 10000 x 7.78 x 0.05) x 100

IMPORTANT TO KNOW

Auto-Closeout is an Automatic Margin Management Function embedded into our trading platforms for your protection. It reduces the risk of losing more than the cash collateral available in your account. Although this is a unique feature that can help restrict the size of your trading losses, it does not ensure that your losses will be limited to the amount you have deposited.

Every 30 seconds or longer (“checking point”), our system examines all clients’ trading accounts. If the client’s net equity falls below 1.5 percent of the open position value in HKD (margin ratio of 30 percent) at the checkpoint, the auto-closeout process will be activated. This procedure does not ensure that the client’s stake is liquidated to within 1.5 percent. Prices may change rapidly against you in a Fast-Moving Market, and it may take some time for the system to complete the liquidation procedure, resulting in higher losses or missed earnings. After your account margin ratio has fallen below 30%, there may be a little time delay before the system triggers the auto-closeout.

Maintenance Margin Level (Margin Call)

When the margin ratio falls below the Maintenance Margin Level during trading hours on any trading day, a margin call notification will be triggered*.

No new orders can be placed, and funds can’t be withdrawn until the margin ratio returns to the Initial (Required) Margin Level.

Triggering Condition

Margin Ratio falls below 60% (i.e. below 3% margin) at anytime of each trading day
(Margin Ratio = Net Equity ÷ Required Margin × 100)

Example
Assuming net equity is HK$6,000, buy 1 lot of EUR/USD at the exchange rate of 1.08096, and the required margin is HK$4,202.9 (based on the USD/HKD exchange rate of 7.78). When the EUR/USD position falls to 1.03488, the account will suffer a loss of HK$3,585.0, and the net equity of the account will drop to HK$2415.0. The margin ratio has dropped below 60%, margin call will be triggered*.

The calculation formula for this example is as follows:

Margin ratio = net equity ÷ required margin × 100
59.9 = (6,000+ floating profit and loss) ÷ required margin × 100
59.9 = (6,000 + (1.03488-1.08096) x 10000 x 7.78 ÷(1.03488 x 10000 x 7.78 x 0.05) x 100

*Frequency of margin calls:
(1) Capital Varsity Forex will issue the first margin call email on a best effort basis if an account’s Margin Ratio fails to meet the Maintenance Margin level at market open or during any trading hours.
(2) If the Margin Ratio falls below the Maintenance Margin level several times or continues below the Maintenance Margin level for an extended period within the same trading day, Capital Varsity will send a margin call email every two hours beginning at market open (e.g. 8:00 a.m., 10:00 a.m., etc).

Ways to Meet Margin Call
You must restore the margin ratio to the Initial (Required) Margin Level as soon as possible after receiving the margin call notification by using the following methods:

IMPORTANT TO KNOW
Even if market conditions improve and net equity surpasses the Maintenance Margin Level, you must restore the margin ratio to the Initial (Required) Margin Level.

It may take some time for the system to remove the limits put on your affected account after the insufficient margin has been restored.

Alerts

When auto-closeout or margin call has been triggered, you will be notified through your trading account and email alerts will be sent to you.

You may view your current Margin Ratio and other account status by logging in to your account and go to Account > Balance & Transfer.

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