1. INTRODUCTION
When you trade using an ADSS CFD or Spread Betting account, you trade on leverage, which allows you to gain a larger market exposure than may otherwise be possible with more traditional forms of investing. As our products are traded on leverage, when opening a position you are only required to maintain a relatively small amount of funds in your account as a deposit which is expressed as a percentage of the notional value of your position. For more volatile markets, the margin level will generally be higher, but for Retail clients the margin requirement may be restricted in accordance with the Financial Conduct Authority's Rules. Further information relating to the applicable margin requirement for each instrument please refer to our Market Information sheets which are available on the Markets section of our website.
As you are trading on leverage and your positions are magnified relative to your initial and on-going margin requirement, you will need to have sufficient funds in your account in order to protect you against market movements. The amount you will be required to deposit is expressed as a percentage of your total position size. Trading on leverage can enhance your profits, but equally can significantly magnify any losses, and as a result it is important that you fully understand how much you are risking with each position. Please note that it is important that you ensure that you monitor your account at all times to ensure that you maintain sufficient equity to cover any margin requirement on any open leveraged positions.
2. WHAT IS A MARGIN CALL?
If the market is moving against you, you may be required to deposit additional funds in order to maintain any open positions. If you do not maintain sufficient funds on your account, you may be subject to a margin call. A Margin call is the term that applies when the equity on account, the total funds you have deposited plus or minus all profits or losses drops below the margin requirement.
At this point, client positions become at risk of being automatically closed in order to reduce the margin requirement on your account to an acceptable level. To avoid a margin call, a client can either deposit additional funds into their account to increase the level of equity in their account, or close any or all positions to reduce their level of exposure.
3. OUR MARGIN CLOSE-OUT PROCESS
If you fail to deposit additional funds to provide sufficient equity into your account, and or the markets continue to move against you are at risk of being subject to an automatic close-out of some or all of your open positions. Should your free equity on account fall below 50% of the required margin level, you no longer have sufficient funds in your account to cover your total margin and consequently we will commence the closure of your open positions.
For example:
If the current close-out percentage (Margin level) is 50% and you have four trades open that each require £500 worth of position margin, your total position margin requirement will be £2,000. If your account revaluation amount then drops to less than 50% of the total margin requirement, in this case £1,000, some or all of the trades constituting this position may be closed out, potentially at a loss to you.
ADSS utilise two trading platforms, MT4 Platform, and our proprietary platform Orex. The close out process may differ depending on the platform, and a description of the process is summarised by platform below (further information on payment options is available on our website here):
4. WHEN WILL CLIENT POSITIONS GET CLOSED ON MT4?
Positions will be automatically closed, if your equity drops beneath 50% of margin requirement. If you trade via the MT4 Platform, this is illustrated using the term “Margin Level”, this is defined as: Margin Level = Equity/Margin, and your account will subject to:
- a Margin call once your Margin Level breaches 100%, and
- an automatic stop out once your Margin level breaches 50%
The notification of a margin call will appear red on MT4 as notice that a client account has breached the minimum required level of equity and any open trades are at risk of being closed out.
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When the margin level drops breaches
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MT4 will:
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100%
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Highlight account summary
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50%
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Commence automatically closing positions with largest losing position
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If you have any open positions, it is your responsibility to ensure that you are aware of our close out process, and ensure that you monitor your account at all times to avoid being subject to a margin call. The MT4 Platform will reduce your exposure by closing one, several or all open margin positions or part of an open margin position in the client account until you have returned to above the 50% level. We will do so without assuming any responsibility towards the client.
5. WHEN WILL CLIENT POSITIONS GET AUTOMATICALLY CLOSED ON OREX?
Positions will be automatically closed, if your equity drops beneath 50% of margin requirement. If you trade via our proprietary Orex Platform, this is shown using the term “Used Margin percentage”, which means once that once your Used Margin reaches 200%, any open positions will be subject to an automatic close out.
Used Margin = Margin /Equity
We will attempt to alert or notify you through the platform when your Used Margin Breaches
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Used Margin
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Alert / Notification:
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100% of Used Margin
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Alert on platform
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101% of Used Margin
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Alert on platform
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150% of Used Margin
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Alert on platform
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175% of Used Margin
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Alert on platform
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200% of Used Margin
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Commence closure with largest losing position first
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The Margin call alert issue via the Orex Platform will be issued once your account has breached the level of equity in the above table, and in the event of any Margin call your open trades are at risk of being closed out.
Please note that whilst we endeavor to provide you with an alert as set out in the above table, it is important to remember that during volatile or fast moving markets we may not be able to provide you with alert before your positions are subject to an automatic close-out. For example, if your equity drops from above 100% of margin to below 50% in less than five seconds, for instance, we will not be able to provide you with an alert(s).
6. LIMITED BALANCE PROTECTION
If you are a Retail client and your account goes into a negative balance, as part of our limited balance protection guarantee, ADSS will bring your account back to zero at no additional cost to you. Please note that limited balance protection is not available to Professional clients and therefore it is possible to incur losses that exceed deposits.