HomeDaily ResultsMegadroid Results: Thur 14th Oct 2010


Megadroid Results: Thur 14th Oct 2010 — 10 Comments

  1. Hi Richard i am writing to address the issue of high risk in forex trading.I have an account with IBFX and i asked them if i can lose more money than my deposit in forex! Suprisingly their answer was ” Yes, it is possible that you could sustain a substantial loss, even more than your deposit!. We do have our margin call policy in place to protect you from excessive losses, but it does not provide a guarantee that they will not occur. The leveraged nature of FX trading means that any market movement will have an equally proportionate effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position ” In other words a brokerage account can go minu – $$$$ if margincall malfuntions or if you mt4 crasses and doesn’t close a lossing position. Have you experienced a similar situation? they didnt answer what happens if your account goes minus and it is their fault!

    thanks in advanced

  2. Hi Nick

    With almost any margin account, there is a chance your account can go negative, and then you’d end up owing the broker money. So they are correct in saying that. I have stock and futures accounts as well and these also operate on margin. So the same possibility arises on those accounts.

    I’ve personally never had an account go negative, but it could happen if a large, highly leveraged trade is placed, and the price goes against you.

    Usually brokers have an automated mechanism in place to generate a Margin Call once the free margin falls below a specific level, and that results in open positions being automatically closed before all the money in the account disappears. But this mechanism is an imperfect safety measure, and is not 100% guaranteed to close your trades before the account goes negative.

    As to what would happen if the account went negative, well I guess that depends on the circumstance. If their platform failed to execute a stop or failed to accept your close orders, then they would be at fault, and they would probably wear the cost. On the other hand, if you didn’t attempt to close the order, and the account was negative before the positions were closed, then there’s a chance you would have to pay them money.

    From a practical point of view, it’s useful to run through a few “what if” scenarios on your account. So for example, say you were trading Megadroid on a $1000 USD account, with leverage of 1:400. And lets say you were trading with a lot size of 20k lot. The 20k position would use about $100 of margin on a 1:400 account, so you’d have around $900 of free margin. Now if the eur/usd moved 200 pips against you for some reason, and if Megadroid didn’t close the order for a technical reason (e.g. computer problem or a software glitch), you’d be $400 down, and still have $500 free margin. Even if your were 400 pips down, your account would still be positive. The point I’m making, is you can almost eliminate the risk of a negative account, by using sensible lots sizes relative to your account balance. Problems generally only happen if a very large order is placed, and the price moves against that order aggressively e.g. after a major economic news event.

  3. Hi richard thanks for your valuable information! I want to mention also something about Megadroid that i belive the MD people should look at. MD closes many trades so early only a few pips profit but if you monitor the trades you will see that if left run for 1-2 hours more they would have hit TAKE PROFIT! So why MD closes trades so early? I haven’t seen any md trade stopped at take profit.Maybe is a matter of risk and money management but how about using a traling stop if a trade goes deep in your favor? I have started double trading MD TRADES and let them run a lot more taking far more pips of the market.

  4. Hi Nick,

    The thing to remember is that the longer a trade stays open, the lower the probability of a win is, and the higher the probability of a stop becomes. That’s why Megadroid reduces it’s take profit target over time, eventually being break-even.

    While there have been some trades over the past few weeks that would have hit the initial take profit if held longer, I can also remember a few other trades a month or 2 ago, that just closed at break-even before the price going against the trade that would have caused a 50 to 60 pip loss.

    So the question really is, would the extra profits be enough to offset the extra stop losses?

    I’m pretty sure the Megadroid people would have backtested various order duration times. But there’s no harm contacting them (support[at]forex-megadroid.com) with your suggestions.

  5. Hi Xero,

    When you look at your trade (see below), you’ll note the open order time and price is similar to what I got, but for some reason your trade closed about 90 minutes after my trades closed.

    The largest take profit Megadroid uses is 15 pips, so given the delay in closing and the large profit (i.e. 49 pips), what has probably happened is that Megadroid has lost connection with the trade server for an extended period of time. And when it regained connection, it closed the trade immediately with a large profit.

    It might to useful to check the MT4 logs to find out whether there were some connection issues with the broker. The other possibility could be an issue with your ISP or local computer around the time of the trade.

  6. I am worried about you said, because my MT4 is running on a VPS (the VPS that IamFX gives free). So, in the same manner the trade was in favour, in might be in a great loss. How can I get this log?

  7. The log files are in the log directory of the MT4 Terminal application. The filename of the log file is the date stamp. Look for something like “20101014.log” It might give you some clues.

    If a broker has given you a free VPS, in all likelihood it’s a pretty cheap one.

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