HFM (formerly HotForex): Loss cut and margin call

HFM

HF Markets has some loss cut lines. Just because you have a loss doesn’t mean you can stay a loss forever. When it reaches a certain line, it will also be a forced loss cut. What is the margin maintenance rate, which is the loss cut level?

Loss cut and margin call

The loss cut margin call is as follows, and there is a difference depending on the account type. Only micro accounts are set separately, all other accounts are common. Both percentages are low and it is difficult to lose money easily. In other words, you can also do high-risk trading.

Loss CutMargin Call
Micro Account10%40%
Others20%50%

Please see below for account types.

What is loss cut?

It means to forcibly close a holding position in order to prevent further expansion of loss when a loss of a certain level or more occurs in a transaction.  This is irrelevant to the trader’s will, as it will be forced to settle when it reaches a certain level, so it will be out of control. However, it can be said that it is a safety measure because it is better than forcibly holding a position and going bankrupt. Settlement will be made at a predetermined level so that the loss does not increase

What is margin call?

A margin call is when a loss occurs and the margin maintenance rate falls below a certain level, the Forex company requests additional margin or closes the position. Even if you ignore a margin call, you will not be penalized, but if a margin call is occurring, it means that there is a high possibility of a loss cut, so this also has the implication of warning traders. Traders are forced to either invest additional funds or cut losses.

What is zero cut?

HFM uses zero cut. Zero cut means that if your account balance becomes negative at some point, the FX broker will compensate and reduce it to zero. This system is used at HFM and means that traders are not chasing debts.

order

The margin call occurs first in the order. A margin call is a warning that a stop-out is coming. At this point, traders will not be forced to liquidate, but they will need to consider whether to take a loss cut or survive. The next thing to be activated is a stop-loss cut. A stop-out is a forced settlement, and the trade will be settled without regard to the trader’s intention. And the last thing that is adopted is zero cut. In the unlikely event that the account balance becomes negative, a zero cut will be activated.

Compare the loss cut line with other companies

It can be seen that the loss cut line is relatively low in HF markets.

Loss Cut (%)
HF Markets10%〜20%
FBS20%
AXIORY20%
XM20%
Land-FX30%
TradeView100%

high risk trade

A low loss cut enables high-risk trading. However, if the loss cut is low, there are more opportunities to reverse and aim for profit, but the balance will be less when the loss is cut. The higher the loss cut level, the less chance of reversal, but the more margin left when the loss is cut. In other words, there are advantages and disadvantages by saying that there is no correct answer.

High risk trading is for advanced users

High-risk trading can result in a loss of principal if done poorly. Since the discretion goes to the trader, the degree of freedom increases, but a certain amount of experience is required for high-risk trading. High risk trading can be said to be advanced trading, so it is not very suitable for beginner traders. Because the money will run out quickly.

High loss cut

If the loss cut line is high, it will be easier for loss cuts, but on the other hand, the balance will not decrease at once. You will not have to worry about clothes damage for a long time, so you can feel safer mentally. A high loss cut comes with many restrictions, but it can be said that it is very suitable for beginner traders whose trading is not stable yet. There is an advantage that you can protect the minimum amount of funds when the loss is cut.

Countermeasures to prevent loss cuts

In the first place, it is important to sell measures in advance to prevent loss cuts. Please take the following measures.

stop loss setting

First of all, before talking about loss cuts, get into the habit of placing a stop loss every time you place an order. Of course, the take profit is the same. A stop loss can be placed at the stop price setting. When the loss becomes large, it will automatically close the position and cut the loss.

Review of the number of trading lots

You should try to reduce the risk of loss cut, so first review the number of trading lots. It is said that 1% to 2% of the total principal is appropriate for the price of one loss cut. Try adjusting the number of lots so that it can be done at that level.

low leverage

If you want to reduce the risk of loss cut, lower the leverage. The lower the leverage, the higher the margin requirements and the more difficult it is to trade large lots with a small amount of capital.

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