I am new to the community, and I wish to add a question regarding the margin topic (something that I wonder if i am missing out on).
Let's assume that my broker gave me a 1:10 leverage, and my "Good faith" deposit is only $2000, which means that I can control up to $20,000 (right?).
If I were to open a big trade that has a $10,000 Margin Requirement, does it mean that my available margin is: $20,000-$10,000= $10,000 (right?)
Now, this is were I get a little bit confused, how do you calculate your total margin limit? What happen if the trade that i opened (the one that has a $10,000 margin requirement) is exceeding my "Good faith deposit" (a draw-down that is greater than my $2000 deposit)?
Does the broker close the trade? or does my "Free margin" allow the trade to go on? I am risking only 50% of my margin, so does it mean that the margin will allow me to have a draw-down that is greater than $2000?
I looked over the web and found the formulas to calculate margin requirement, but I am not sure about the issue.
The formulas: Margin= 1/ Leverage
Equity- Equity = Balance + Floating Profit/Loss
Margin level- Margin Level = (Equity / Margin) x 100
Free margin- Free Margin = Equity - Margin
Any help would be very appreciated .
P.s I apologize if my question is not in the right format (I am still learning how to submit questions to the community)