Forex margin is a good faith deposit that a trader puts up as collateral to initiate a trade. Essentially, it is the minimum amount that a trader needs in the trading account to open a new position. This is usually communicated as a percentage of the notional value (trade size) of the forex trade. The difference between the deposit and the full value of the trade is “borrowed” from the broker.
An extremely important requested feature for QSForex has been the ability to backtest over multiple days. Previously the system only supported backtesting via a single file. This was not a scalable solution as such a file must be read into memory and subsequently into a Pandas DataFrame. While the tick data files produced are not huge (roughly 3.5Mb each), they do add up quickly if we consider multiple pairs over periods of months or more.
It is essential that traders understand the margin close out rule specified by the broker in order to avoid the liquidation of current positions. When an account is placed on margin call, the account will need to be funded immediately to avoid the liquidation of current open positions. Brokers do this in order to bring the account equity back up to an acceptable level.
Trading on margin can be a profitable Forex strategy, but it is important to understand all the possible risks. You should make sure you know how your margin account operates, and be sure to read the margin agreement between you and your selected broker. If there is anything you are unclear about in your agreement, ask questions and make sure everything is clear.
Free margin in Forex is the amount of money that is not involved in any trade. You can use it to take more positions, however, that isn't all - as the free margin is the difference between equity and margin. If your open positions make you money, the more they achieve profit, the greater the equity you will have, so you will have more free margin as a result. There may be a situation when you have some open positions and also some pending orders simultaneously.
Imagine that you have $10,000 on your account account, and you have a losing position with a margin evaluated at $1,000. If your position goes against you, and it goes to a $9,000 loss, the equity will be $1,000 (i.e $10,000 - $9,000), which equals the margin. Thus, the margin level will be 100%. Again, if the margin level reaches the rate of 100%, you can't take any new positions, unless the market suddenly turns around and your equity level turns out to be greater than the margin.
For securities, the definition of margin includes three important concepts: the Margin Loan, the Margin Deposit and the Margin Requirement. The Margin Loan is the amount of money that an investor borrows from his broker to buy securities. The Margin Deposit is the amount of equity contributed by the investor toward the purchase of securities in a margin account. The Margin Requirement is the minimum amount that a customer must deposit and it is commonly expressed as a percent of the current market value. The Margin Deposit can be greater than or equal to the Margin Requirement. We can express this as an equation:
Often, closing one losing position will take the margin level Forex higher than 5%, as it will release the margin of that position, so the total used margin will decrease and consequently the margin level will increase. The system often takes the margin level higher than 5%, by closing the biggest position first. If your other losing positions continue losing and the margin level reaches 5% once more, the system will just close another losing position.
In particular we need to modify -every- value that appears in a Position calculation to a Decimal data-type. This includes the units, exposure, pips, profit and percentage profit. This ensures we are in full control of how rounding issues are handled when dealing with currency representations that have two decimal places of precision. In particular we need to choose the method of rounding. Python supports a few different types, but we are going to go with ROUND_HALF_DOWN, which rounds to the nearest integer with ties going towards zero.
Equity – Your equity is simply the total amount of funds you have in your trading account. Your equity will change and float each time you open a new trading position, in such a way that all your unrealised profits and losses will be added to or deducted from your total equity. For example, if your trading account size is $1,000 and your open positions are $50 in profit, your equity will amount to $1,050.
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