Stop Loss Limitations and Maintenance Margin

The maximum Stop Loss is 50% for all trades in accordance with the new European Securities and Markets Authority (ESMA) regulations which came into effect on August 1st 2018.

Stop Loss limitations mitigate the possible risk to your capital in case of sharp movements in the market.

You will have the option to increase your Stop Loss beyond the set limits once the trade is open. Should you wish to extend your Stop Loss, funds will be added to the trade from your balance as part of our 'Maintenance Margin' feature, which acts as an additional safety net for your trade. It is important to note that if you do not have sufficient funds in your balance, you will not be able to extend your Stop Loss.

 

How does the Maintenance Margin work?

Let's say you invest $1000 in a trade with the Stop Loss set to the maximum allowable loss: 50% (meaning that the trade will close once the position reaches a loss of $500). If you wish to extend the Stop Loss to 100% once the trade is open, an additional $500 will be allocated from your balance to the invested amount, bringing the total invested amount to $1500, and the Stop Loss to $1000. The 'extra' $500 is what we call the 'maintenance margin'.

It is important to bear in mind that the maintenance margin is always based on the initial invested amount, so if you have already increased the size of the trade you wish to update, via previous SL extensions, the gap between the current invested amount and the 50% maintenance margin will be larger.

 

Why do we need a maintenance margin?

During times of market volatility, prices can swing up and down by large increments. Therefore, in the event that you set your SL to 100% of the invested amount and there is a sudden market spike, you may lose more than you originally invested. The maintenance margin helps prevent this situation by using funds from your balance to buffer the trade.