The OANDA FXTrade platform supports margin trading, which means you can enter into positions larger than your actual Account Balance. One advantage of margin-based trading is that you can strongly leverage the funds in your account and potentially generate large profits relative to the amount invested. The downside is that you can also potentially incur significant losses in your margin capital very quickly.

To ensure you can cover any losses you might incur on your positions, OANDA requires sufficient collateral. This collateral is typically referred to as margin. Although there is no minimum margin deposit required to open an FXTrade account with OANDA, the margin available in your account will limit the size of the positions you can open and will affect when you receive a margin call. A margin call is the situation when the FXTrade Platform automatically closes all of your open positions and may be necessary to ensure that you cannot lose more than the amount of collateral in your Account.

The term leverage is often used to describe the margin requirements. A leverage of 50:1 corresponds to a margin requirement of 2% (1 divided by 50 is 0.02 or 2%). A 2% margin requirement means that, if you wish to open a new position, then you must have 2% of the size of that position available as margin. Another way of saying the same thing: for each dollar margin available you can make a 50 dollar trade.

OANDA offers a maximum leverage of 50:1. It also enables OANDA clients to cap their leverage at 40:1, 30:1, 20:1, or 10:1—we recommend 20:1 or lower. Other companies may offer 100:1 leverage, or even 200:1, but OANDA believes these levels are far too risky and could cause clients to lose all their funds very quickly. Serious professionals seldom trade at those levels of risk.

(These margin rules apply to trades opened on or after November 30, 2003. For trades opened prior to that date, OANDA’s old FXTrade margin rules continue to apply.)

• OANDA FXTrade requires a minimum margin of 2% (or maximum leverage of 50:1) when both currencies/commodities in a currency pair are in the following list:

  AUD, CAD, CHF, EUR, GBP, JPY, USD

  NZD, NOK, SEK, DKK

  XAG, XAU

  List 1.

• If one or both of the currencies/commodities in a currency pair are not in List 1 above, OANDA FXTrade requires a minimum margin of 4% (or maximum leverage of 25:1). This is an NFA requirement.

• The following table shows FXTrade margin requirements for OANDA’s available leverages:

  Leverage	10:1	20:1	30:1	40:1	50:1
  Margin Requirement (if both currencies are in List 1)	10%	5%	3.3333%	2.5%	2%
  Margin requirement (if one currency is not in Table 1)	10%	5%	4%	4%	4%

• An FXTrade account will receive a margin call when the margin required becomes twice the Net Asset Value of the account (or, in other words, if the margin required divided by two becomes larger than the net asset value of the account). A margin call results in an automatic closing of all open positions.

OANDA FXTrade requires that you always have sufficient margin to cover any losses you might incur. As soon as this is no longer the case, FXTrade will start the process of closing all your open positions automatically, using the prevalent market rates at the time of closing so as to prevent further losses.

Specifically, the Margin Used (that is, the margin requirement of your open positions) divided by two must always be less than the Net Asset Value of your account. When this requirement is not met any longer, then a margin call will occur without warning and all your open positions will be closed. You are responsible for monitoring your account to ensure a margin call won’t happen.

For your convenience, the “Margin Call” field in the Account Summary of the FXTrade user interface is always set to the Margin Used divided by two. The closer this value is to the Net Asset Value (also shown in the same table), the closer you are to a margin call.

If you are logged in to FXTrade, then the system will make an attempt to warn you when the Net Asset Value comes to within 5% of a margin call, and again when the Net Asset Value comes to within 2.5% of a margin call. This warning is shown in a window that pops up automatically on your screen.

Please note: in a quickly moving market, there may be little time between warnings, or there may not be sufficient time to warn you at all.

For detailed information on how to calculate margins, go to the Learn section.

It is not a good idea to get a margin call. We suggest that you take proactive measures to prevent getting a margin call on your account. For example,

• Monitor the status of your Account continuously.

• Use a lower leverage so you impose a higher margin requirement on yourself. This way, you will be aware of a potential margin call sooner, and be able to increase leverage as a last resort to head off a margin call.

• Specify a stop-loss order for each open trade to limit downside risk. You can specify the stop-loss rate at the time you issue a trade, or add a stop-loss order at any time for any open trade. You can also change your stop-loss orders at any time to take current market prices or other conditions into account. (Click on an open trade in the "Trades" table, then click "Modify" in the pop-up window to change the stop-loss.)

If you happen to be close to a margin call, the unique features of the FXTrade platform provide some simple strategies to avoid the margin call:

• Incrementally reduce the size of your positions as you get close to a margin call. (FXTrade allows you to trade in arbitrary units, as opposed to fixed lots.)

  For example, if you get a first margin call warning, reduce the size of all your open positions by 10%. This effectively lowers the amount of margin required, giving you more breathing room.

• Close individual positions to reduce the amount of margin required.

• If you’ve used a lower leverage, you can increase the leverage on your account as a last resort.

• Transfer additional funds into your account. Note, however, that delays in fund transfers could cause the funds to arrive too late.

Some people erroneously believe that OANDA might benefit from a client getting a margin call. The truth is that OANDA does not benefit at all. To the contrary.

Firstly, OANDA hedges its exposure for trades made by its clients by making corresponding trades with its third party banks. As a result, if you lose money on your OANDA trade, OANDA loses a corresponding amount to its third-party bank.

Secondly, traders who lose money have less money to use for trading and may reduce their trading activity. As a company, OANDA benefits most when its customers are trading.

The bottom line is that each margin call harms a client and it harms OANDA. But it also protects our client from loss.