Orders from individual accounts

Calculation of DA in % of maximum order amount depends on whether there are open positions on the instrument on which a user is going to create a market order. Below you can see  the description of three possible cases which differ by calculation of DA as % of maximum order amount.

Case 1

Imagine that an individual account has DA set as X % of maximum order amount. A user creates a market order from this account. Default amount of this order equals X % of maximum order amount which can be bought / sold for account’s usable margin at the moment of order creation.

Note: Let’s assume that in the examples listed below commission, transaction fee, open trade charge are set to 0 and spread is 0, open markup is set to 0 unless it is stated otherwise.

Example A. An account has no open positions. Balance = Usable Margin = 10 000. Margin Requirement on EURUSD is 1 000, Margin Requirement on GBPUSD is 1500. DA in % is set to 30%. When a trader opens the EURUSD order creation dialog window, 3 lots (3*Contract Size for system in amount) will be displayed in the Amount field. Let’s examine how the  system gets such value:

1)First, it is necessary to calculate maximum order amount: 10 000 of Usable Margin devide by 1000 (Margin Requirement), that is 10 lots (contracts).
2)Afterwards the system calculates 30% of this value: 10*0.3. The result is 3 lots/contracts.

If a trader opens the GBPUSD market order creation dialog window, 2 lots (2*Contract Size for system in amount) will be displayed in the Amount field. Let’s examine how system gets such value:

1)First, it is necessary to calculate maximum order amount: 10 000 of Usable Margin devide by 1500 (Margin Requirement), that equals 6.66, in other words not more than 6 lots can be bought/sold.
2)Afterwards the system calculates 30% of this value: 6*0.3. The result is 2 lots/contracts.

Example B. Let’s suppose that an account has already open positions on some instruments other than EURUSD and GBPUSD. Account’s Balance = 10 000, Used Margin is 3 000. Usable Margin = 7 000. When a trader opens the EURUSD market order creation dialog window, 2 lots (2*Contract Size for system in amount) will be displayed in the Amount field. Let’s examine the how system gets such value:

1)First, it is necessary to calculate maximum order amount: 7 000 of Usable Margin devide by 1000 (Margin Requirement), that is 7.
2) Afterwards the system calculates 30% of this value: 7*0.3=2.1. The result is rounded to 2 lots/contracts.

When a trader opens the GBPUSD market order creation dialog window, 1 lot (1*Contract Size for system in amount) will be displayed in the Amount field. Let’s examine how system gets such value:

1)First, it is necessary to calculate maximum order amount: 7 000 of Usable Margin devide by 1500 (Margin Requirement), that is 4.66.
2)Afterwards the system calculates 30% of this value: 4.66*0.3 = 1.4. The result is rounded to 1 lot/contract.

Case 2

Imagine that an individual account has open positions on an instrument when hedging is disabled on the system (it means that opening of a new position will close or partially close any existing positions in the opposite direction).The account has DA set as X % of maximum order amount. User creates an order to open position in opposite trade direction on the same instrument, then

DA will be calculated as % of maximum order amount which can be bought / sold for [Usable margin + 2*Used Margin of open positions on this instrument].

For example: Account’s Balance = 10 000, Margin Requirement = 1000. DA = 50 %. A Sell position on EURUSD is opened on 6 lots. Used Margin = 6000, Usable Margin = 4000. In the order creation dialog for Buy position, the Amount field will display 8 lots by default. Let’s examine how the system gets such value:

1)Opening 6 lots of Buy trade would cause the Sell position to close,  which would lead to the increase of Usable Margin 4000 to 10 000. 10 000 of Usable Margin allows to open 10 lots or contracts (with Margin Requirement = 1000). Altogether the maximum order amount = 6+10 = 16 lots or contracts.
2) Afterwards the system calculates 50% of this value: 16*0.5 = 8.

In the order creation dialog for Sell position, the Amount field will display 2 lots by default. The system gets such value the same way as described in Case 1.

Case 3

Let’s now examine the same situation as in case 2 but when hedging is enabled on the system (it means that opening of a new position does not close or partially close any existing positions in the opposite direction).

DA will be calculated as % of maximum order amount which can be bought / sold for [Usable margin + Used Margin of open positions on this instrument].

For example: Account’s Balance = 10 000, Margin Requirement = 1000. DA = 50 %. Sell position on EURUSD is opened on 6 lots. Used Margin = 6000, Usable Margin = 4000. In the order creation for Buy position, the Amount field will display 5 lots by default. Let’s examine how the system gets such value:

1)Opening 6 lots of Buy trade would leave Usable Margin unchanged  as such position hedges the open Sell position. Opening extra lots would use Usable Margin = 4000. So after opening 6 Buy lots, you can still open 4 000 / 1000 = 4 lots or contracts (Usable Margin divide by MR). So altogether maximum order amount is 6+4 = 10 lots.
2)Afterwards the system calculates 50% of this value: 10*0.5 = 5.  

In the order creation dialog for the Sell position, the Amount field will display 2 lots by default. System gets such value the same way as described in Case 1.

Note: If a user creates an order from an account with DA set as % of maximum order amount and the resulting amount is less than 1 lot but the account’s balance allows to open 1 lot position, the order amount is approximated to 1 lot. For example, account’s Usable Margin is 6000. Margin Requirement is 1000. DA = 10%. No open positions. Maximum order amount is 6 lots (6000/1000). DA = 6*10% = 0.6. But the system approximates it to one lot as account has enough money to open a 1 lot position.  

Commission, transaction fee, open trade charge, spread and open markup in calculation of DA in % of maximum order amount

Commission, transaction fee, open trade charge, spread and open markup directly effect the calculation of DA in % of maximum order amount as they influence the maximum order amount. Let’s review it on the following example. An account has no open positions. Balance = Usable Margin = 50. Margin Requirement on EURUSD is 10, contract size is 1 000, point size = 0.0001. DA in % is set to 50%. Commission is set to $2 per lot. Spread is 3 pips, open markup is 1 pip.

If commissions, spread and open markup were 0, then it would be possible to open 5 lots/contracts: 50 / 10 (Usable Margin divide by Margin Req). 5 lots would cause $10 of commisons, PL equal to (3spread+1open markup) * 0.0001(point size) * 1000(contract size) * 5(lots)= $2. Together with PL it would cause the decrease of Equity on $12 from $50 to $38. But it’s necessary to have $50 of margin to maintain position on 5 lots. That’s why DA in % won’t be calculated from $50 as it is not maximum order volume.

4 lots would cause $8 of commissions, PL equal to (3spread+1open markup) * 0.0001(point size) * 1000(contract size) * 4(lots)= $1.6. Together with PL it would cause decrease of Equity on $9.6 to $40.4. That is enough to maintain 4 lots position with MR = $10. So DA shall be calculated from maximum order amount equal to 4 lots. DA = 4*50%= 2.