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Originally Posted by sarbot
I agree - - - I'm researching now and the only downside I can discover is that the maximum leverage they offer is 50:1.
Steve
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They have an interesting way of using margin. To open a position, you use 50:1 but to maintain that position once it's open the margin is 100:1.
Example:
A $10,000 account.
You open a trade for $200,000 CHF.
The margin to open is $2,000 per lot x 2 =$4,000.
Once opened, you only need $2,000 to maintain it.
Therefore, you have $8,000 to lose before a margin call occurs.
This system benefits them more than the trader.
An example would be thus:
Assume one is crazy and likes gambling.
You have the same $10,000 account.
You want to max out your margin (coz you're crazy) so you open up a CHF position for 4.8 lots and use $9,600 in margin to open up.
You now only need $4,800 to maintain and you can then lose $5,200 on this position.
If you used standard 50:1 margin then you would only be able to lose $400 on the position because you would need to keep the $9,600 as margin.
If you used standard 100:1 margin, you could open a position of 9.6 lots using $9,600 in margin and risk only $400 on the trade before you get shut down.
Not that you would want to do this (unless you're crazy, of course) but it's definitely skewed to work for them.
Nat