Trading with only $100 poses significant risk in most markets, as it limits position size and provides little room for losses. It's essential to manage risk carefully and consider lower-leverage assets or micro-lot trading to safeguard your account.

*Have you ever wondered what occurs when you decide to initiate a trading account with a mere $100?*

*Perhaps €100 or £100?*

Given that margin trading permits you to enter trades with a relatively small sum of money, commencing forex trading with a $100 deposit is certainly conceivable.

*But is it advisable?*

Let's explore the potential outcomes of such a decision.

In this particular trading scenario, your chosen retail forex broker has established a Margin Call Level of 100% and a Stop Out Level of 20%.

Now that we've clarified the definitions of Margin Call and Stop Out Levels, let's delve into the feasibility of trading with a $100 capital.

Assuming you're ready to take the plunge, you deposit $100 into your trading account.

This initial deposit grants you an account balance of $100.

Here's how it appears within your trading account:

Suppose you're interested in taking a short position on EUR/USD at 1.20000, and you wish to open a position with 5 micro lots (1,000 units x 5).

The Margin Requirement specified is 1%.

Now, let's determine the amount of margin required ("Required Margin") to initiate this trade.

As our trading account is denominated in USD, it's necessary to convert the EUR value into USD to establish the Notional Value of the trade.

- €1 = $1.20
- €1,000 x 5 micro lots = €5,000
- €5,000 = $6,000

The Notional Value is $6,000.

To calculate the Required Margin, use this formula:

- Required Margin = Notional Value x Margin Requirement
- $60 = $6,000 x .01

Given that the Margin Requirement is 1%, the Required Margin amounts to $60, assuming your trading account is denominated in USD.

In the current scenario, there are no other open trades apart from the one we've just entered. Consequently, as we possess only a SINGLE open position, the Used Margin matches the Required Margin.

Let's imagine that the price has slightly shifted in your favor, and your position is currently at the breakeven point. This signifies that your Floating P/L remains at $0.

Now, let's compute your Equity:

- Equity = Balance + Floating Profits (or Losses)
- $100 = $100 + $0

Hence, your account's Equity stands at $100.

Having determined the Equity, we can proceed to calculate the Free Margin:

- Free Margin = Equity - Used Margin
- $40 = $100 - $60

Your Free Margin amounts to $40.

With the Equity value in hand, we can now ascertain the Margin Level:

- Margin Level = (Equity / Used Margin) x 100%
- 167% = ($100 / 60) x 100%

The Margin Level currently stands at 167%.

At this juncture, these are the account metrics displayed within your trading platform:

EUR/USD has surged by 80 pips, and its current trading price is 1.2080.

Let's assess the impact on your account.

You'll notice that the Used Margin has undergone a change. This fluctuation arises due to the alteration in the exchange rate, which in turn affects the Notional Value of the position.

Such changes necessitate a recalculation of the Required Margin. It's crucial to understand that alterations in the EUR/USD price lead to corresponding changes in the Required Margin.

With EUR/USD currently trading at 1.2080 (as opposed to the previous rate of 1.2000), we need to determine the new Required Margin. Given that our trading account is denominated in USD, we must convert the EUR value to USD to establish the Notional Value of the trade.

- €1 = $1.2080
- €1,000 x 5 micro lots = €5,000
- €5,000 = $6,040

The Notional Value now amounts to $6,040.

In comparison, the previous Notional Value was $6,000. The rise in EUR/USD signifies a strengthening of the EUR. Since your account is denominated in USD, this results in an increase in the position's Notional Value.

**We can now calculate the Required Margin:**

- Required Margin = Notional Value x Margin Requirement
- $60.40 = $6,040 x .01

It's important to note that the Required Margin has increased due to the rise in the Notional Value. Given a Margin Requirement of 1%, the new Required Margin is $60.40, while the previous figure was $60.00 (when EUR/USD was trading at 1.2000).

The Used Margin is updated to match the changes in Required Margin for all open positions. In this case, with only one position open, the Used Margin will equal the new Required Margin.

EUR/USD's movement from 1.2000 to 1.2080 corresponds to an 80-pip difference. Since you're trading micro lots, a 1-pip move translates to $0.10 per micro lot. With a position size of 5 micro lots, a 1-pip move amounts to $0.50.

Given that you're short on EUR/USD, you currently have a Floating Loss of $40.

- Floating P/L = Position Size x (Current Price - Entry Price)
- Floating P/L = 5,000 x (1.2080 - 1.2000)
- Floating P/L = -$40

Your Equity now stands at $60.

- Equity = Balance + Floating P/L
- $60 = $100 + (-$40)

Your Free Margin is now $0.40.

- Free Margin = Equity - Used Margin
- $0.40 = $60 - $60.40

Your Margin Level has decreased to 99%.

- Margin Level = (Equity / Used Margin) x 100%
- 99% = ($60 / $60.40) x 100%

It's important to remember that the Margin Call Level is triggered when the Margin Level reaches 100%. At present, your Margin Level remains below 100%. However, you have received a Margin Call warning.

Your positions will remain open, but you won't be able to open new positions until the Margin Level rises above 100%.

These are the current account metrics displayed within your trading platform:

EUR/USD has made another upward move, gaining 96 pips, and is now trading at 1.2176.

Let's analyze the impact on your account.

The Used Margin has changed once more due to the shift in EUR/USD's exchange rate, which affects the Notional Value of your position. It's important to note that alterations in the EUR/USD price result in corresponding adjustments to the Required Margin.

With EUR/USD now trading at 1.2176 (compared to the previous rate of 1.2080), we must calculate the new Required Margin. Since our trading account is denominated in USD, we need to convert the EUR value to USD to determine the Notional Value of the trade.

- €1 = $1.2176
- €1,000 x 5 micro lots = €5,000
- €5,000 = $6,088

The Notional Value is now $6,088.

In contrast, the previous Notional Value was $6,080. The rise in EUR/USD signifies a strengthening of the EUR, which increases the position's Notional Value.

**We can now calculate the Required Margin:**

- Required Margin = Notional Value x Margin Requirement
- $60.88 = $6,088 x .01

It's important to note that the Required Margin has increased due to the rise in the Notional Value. Given a Margin Requirement of 1%, the new Required Margin is $60.88, while the previous figure was $60.40 (when EUR/USD was trading at 1.2080).

The Used Margin is updated to match the changes in Required Margin for all open positions. In this case, with only one position open, the Used Margin will equal the new Required Margin.

EUR/USD's movement from 1.2080 to 1.2176 corresponds to a 176-pip difference. Since you're trading 5 micro lots, a 1-pip move translates to $0.50.

As your position is short on EUR/USD, you currently have a Floating Loss of $88.

- Floating P/L = (Current Price - Entry Price) x 10,000 x $X/pip
- -$88 = (1.2176 - 1.2080) x 10,000 x $0.50/pip

Your Equity now stands at $12.

- Equity = Balance + Floating P/L
- $12 = $100 + (-$88)

Your Free Margin is now -$48.88.

- Free Margin = Equity - Used Margin
- -$48.88 = $12 - $60.88

Your Margin Level has decreased to 20%.

- Margin Level = (Equity / Used Margin) x 100%
- 20% = ($12 / $60.88) x 100%

It's crucial to note that your Margin Level has now fallen below the Stop Out Level.

These are your current account metrics displayed within your trading platform:

The Stop Out Level is reached when the Margin Level drops to 20%.

At this juncture, your Margin Level has indeed touched the Stop Out Level.

Consequently, your trading platform will automatically execute a Stop Out.

This entails that your trade will be promptly closed at the prevailing market price, leading to two distinct outcomes:

- Your Used Margin will be released.
- Your Floating Loss will be realized.

In light of this development, your Balance will be adjusted to reflect the Realized Loss.

Now that your trading account has no active positions and is considered "flat," your Free Margin, Equity, and Balance will all assume identical values.

In this state, Margin Level and Floating P/L become irrelevant since no open positions exist.

Let's review how your trading account has evolved from its initial state to the present.

Prior to the trade, you held $100 in your account.

Now, following a solitary trade, your account balance stands at a meager $12!

It's barely sufficient to cover a month's subscription to Netflix.

This translates to an 88% loss of your initial capital.

- % Gain/Loss = ((Ending Balance - Starting Balance) / Starting Balance) x 100%
- -88% = (($12 - $100) / $100) x 100%

It's worth noting that this significant loss occurred despite a relatively modest 176-pip movement in the EUR/USD exchange rate.

A 176-pip shift is quite commonplace for EUR/USD and can transpire within a single day or over the course of just a couple of days.

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