FXOptimax is always committed to provide an excellent trading condition for every trader. Our STP model enable us to support client’s profitable trading as we are always on the same side, thus We place no restriction to any particular trading style.
This business model however, exposes a downside risk for FXOptimax. The combination of high leverage and unrestricted trading style, sometimes, in a certain period of high volatility (such as on high impact news release) and the possibility of price gap (please note that price is not always drifting, sometimes it jumps), can led client’s equity become negative. Client is losing more money than his deposit (collateral) with us. It is a terrible situation that we want to avoid with highest priority, since we will bear greater amount of loss than our clients.
For example, if client has 1 lot EURUSD open position with USD 150 equity, and price jump 20 pips after news release — in just a single tick, that position will be stopped out with USD 200 loss, thus will result client’s equity become negative USD 50. As our model is STP, we also lose USD 200 at our prime broker accounts, means we may lose money more than client’s collateral.
The negative equity at client’s account is client’s liability according to our customer agreement. It is not a profitable situation for both FXOptimax and client.
There are several approaches we take to mitigate this situation:
1. Leverage adjustment during trading hours: As covered at customer agreement, FXOptimax reserves to adjust trading account leverage if it posses high risk of negative equity. Scenario that posses high risk of negative equity are (but not limited to): entering the market with full margin on leverage higher than 1:100 (1:50 for metal), news breakout strategy, entering the market right before news release and martingale system. Our system will automatically reduce the leverage based on our risk management criteria. Client will receive notification to his/her email address should there is any change occurred to the leverage.
We do not restrict these particular trading strategies. Client can trade news breakout and other high risk scalping strategy, but only with reasonable leverage and margin availability.
2. Leverage adjustment during weekend and extraordinary economic and political issues over the weekend: In about 8 hours prior to the weekend market closing, FXOptimax will adjust the leverage of the account that posses high risk of negative equity to 1:100 which may caused by market gap when it reopens in the following week. We will notice client before we change occurred, so client will have time to start reducing their exposure to avoid margin call.
3. Close the account: In worst case, FXOptimax reluctantly has to close the account if we consider the account posses more risk that will inflict a financial loss for us.
Once the leverage is adjusted, client can request to change the leverage back to the original level and it will be a subject to our approval.
If you plan to trade with such methods and timings, please feel free to inform us. We will make any necessary adjustment and we may give the green light.