The example yesterday covered the scenario with you trading a single position. But what if you had MULTIPLE positions open?
Here’s an example of how the liquidation process would work if you had two or more positions open.
Each broker has its own specific liquidation process, so be sure to check with yours.
But this is a popular approach. It will at least give you a good idea of what kind of horror you might experience if you’re trading too BIG.
Let’s pretend the Stop Out level is at 100%.
If at any point, the Margin Level drops below 100% of the margin required.. you will experience an AUTO LIQUIDATION of the position that has the largest unrealized loss!
So if you have multiple positions, the open position with the greatest unrealized loss is closed first.
Then that will be followed by the next largest losing position.
And again, followed by the next largest losing position, and so on, UNTIL, the Margin Level (maintenance margin) is back to 100% or higher.
Depending on the size and unrealized P&L of the open positions, all your open positions could be liquidated in order to meet the margin requirement!
Remember, YOU, and YOU alone, are responsible for monitoring your account and making sure you are maintaining the required margin at all times to support your open positions.
We have warned you. Don’t be crying to your broker when your position gets auto-liquated.
You can still cry, of course. But only in front of a mirror. 😭
Now that we’ve covered all the important metrics that you need to know in your trading platform, let’s take everything you’ve learned so far about margin trading and put it all together using different trading scenarios.
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