Margin Calls & Loss Cutting

To prevent loss of the customer's margin deposits, when a position held by a customer reaches or exceeds a certain level of losses, FXON will issue a notice of decrease in deposit margin, called a "margin call." If losses increase further beyond this level, loss cutting will be implemented, enforcing the settlement for all relevant positions.

  • A
  • B
  • C
  • D
  • A.Margin level ratio 100% or higher New orders accepted
  • B.Margin level ratio 100% or lower Domain in which new orders are not accepted
  • C.Margin level ratio 50% or lower Margin call level
  • D.Margin level ratio 20% or lower Implementation of loss cut

Margin call

FXON issues a margin call warning when capital in the account is not sufficient to maintain the position, which is when the margin level ratio falls below 50%. When there is a margin call, the profit/loss in the terminal window of MetaTrader 4 and 5 will be displayed in red.

A margin call is a warning that there is a high possibility that the customer will not be able to continue to maintain the position. When a margin call has taken place, we recommend that customers take countermeasures such as increasing their deposited funds or settling one or more positions.

If neither countermeasure implemented when the market proceeds further in a disadvantageous direction, decreasing the margin rate of the position, then loss cutting, as described below, will be conducted.

About margin level ratio

Margin level (%)

Available capital

To hold the position

Total amount of deposited funds

Required deposit margin

100

The margin level ratio against the net asset, is the ratio of deposited funds divided by the deposit margin necessary to uphold the trading position. Margin calls and loss cutting calculated based on this margin level ratio.

In MetaTrader 4 and 5, the margin level is displayed in the terminal window.

Loss cut

To prevent further losses at levels below the margin call settings (up to 50%) with a margin level of less than 20%, FXON imposes an automatic settlement through offsetting trades for the positions.

Total deposit
Total necessary deposit margin
Balance
greater_than_sign
Margin

Safe trading range means low ratio of total necessary deposit margin to total deposit.

Total deposit
Total necessary deposit margin
Balance
equal_sign
Margin

New orders not accepted when the ratio of total necessary deposit margin to total deposit reaches 1:1 (100%)

Total deposit
Total necessary deposit margin
Balance
greater_than_sign
Margin

Loss cutting implemented when the ratio of total necessary deposit margin to total deposit reaches 1:5 (20%)

In the absence of a loss cut rule, losses may exceed funds deposited. In such circumstances, not only could all funds deposited be lost, but the customer may be forced to pay additional losses as well. In order to prevent such situations, loss cut provides the minimum protection for customers' deposited funds.

Loss resetting (zero cut guarantee)

When, due to higher than expected market liquidity, it is not possible to execute counter orders in accordance with the loss cut rules, customer's deposited fund balance fall below 0. Under such irregular conditions, FXON implements a zero-cut guarantee, under which losses will not exceed funds deposited, even if the deposited funds fall below 0. The negative balance of deposited funds will be resolved, and the customer's balance returned to 0, within 24 hours.

Loss cut rules (sequence of automatic mandatory settlement)

When loss cutting is implemented, it will be executed in accordance with the loss cut rank, starting from the positions with the largest loss valuation (negative profits).

When a loss cut situation occurs, loss cutting will first be executed for positions with larger loss valuation, as illustrated below.

Entry date and time Loss on valuation Loss cut execution sequence
Position A Sept. 1, 11:00 -56,200.00 1st
Position B Sept. 2, 14:00 -5,343.81 3rd
Position C Sept. 3, 16:00 -8,851.03 2nd

(*)A loss cut may not be conducted in accordance with the loss cut rank due to decreased liquidity of the covered financial institutions or the market conditions