Forex - Forex Trading: Basic Concepts
Understanding Position Liquidation
Liquidation is the next step to margin call if the account is not topped-up or the position(s) don’t start moving in the favour of the client.
In case of margin calls, a client has the option to either liquidate/close one/more of his open positions; liquidation occurs when a client’s open positions are closed by the trading-system itself when the account equity has fallen down to a pre-defined percentage of the margin requirement.
Hence, if the Account Equity falls below $ 175, Liquidation is triggered. Liquidation process continues till Account Equity = Margin Requirement.
Liquidation always starts by closing out the position which requires the largest margin- in the above case that may be USDJPY or EURUSD. If liquidation of the first position equates the Account Equity to Margin Requirement, the process stops; else it continues to the next open position.
1:43 AM
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