OANDA fxTrade Margin Rules

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 alert and possible margin closeout. A margin closeout is the situation when the fxTrade platform automatically closes all of your open positions in the affected account, to significantly decrease the probability of losing 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 fxTrade requires that you always have sufficient margin to cover any losses you might incur. As soon as this is no longer the case, so as to prevent further losses, fxTrade will start the process of closing all your open positions automatically, using the prevalent market rates at the time of closing.

Specifically, the Margin Used for 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 closeout will occur immediately without warning and all your open positions will be closed. You are responsible for monitoring your account to ensure a margin closeout won’t happen.

For your convenience, the “Margin Closeout” 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 closeout.

If you are signed in to the fxTrade platform via http://fxtrade.oanda.com/login, then the system will make an attempt to warn you when the Net Asset Value comes to within 5% of a margin closeout, and again when the Net Asset Value comes to within 2.5% of a margin closeout. This warning is shown in a window that pops up automatically on your screen.

We suggest that you take proactive measures to avoid getting a margin closeout on your account. For example,

• Monitor the status of your account continuously.

• Use a lower leverage so you can impose a higher margin requirement on yourself. This way, you will not be tempted to enter into positions beyond your comfortable leverage level. You will also be aware of a potential margin closeout sooner, and be able to increase leverage as a last resort to head it off.

• 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 closeout, the unique features of the fxTrade platform provide some simple strategies to avoid it:

• Incrementally reduce the size of your positions as you get close to a margin closeout. (fxTrade allows you to trade in arbitrary units, as opposed to fixed lots, which makes this simple to do.)

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

• If you are using a lower leverage, you can increase the leverage on your account as a last resort.

• Transfer additional funds into the account from another subaccount.

• Add funds to the account. Note, however, that the time it takes to add funds could mean your funds arrive too late.