ZuluTrade Margin Call -o- Meter ?

the Margin Call -o- meter ™ is a quick, graphical way of letting the user know how likely they are to blow-up their account based on their provider and account settings. The data appears as a thermometer-like zero to 100 scale. They even color-code it so that low numbers are a nice soothing green and the higher-risk values are a high-blood-pressure inducing orange to red. As you can see below, the meter shows my current odds of blow-out at 82.8% which is pretty high for a conservative guy like myself.

By way of background, Zulutrade updated the o'Meter in the past few months to include a calculation regarding the number of open positions each provider is likely to open. To prove this, let's take a look at a few sample setups.

First, setup your account for provider Bigwin. Click the Advanced link and set him for 1 Max total open trades with a Stop value of 180 pips. The screen will look like this:

Next, setup your account with provider Pro-B5. Click the Advanced link and set him for 1 Max total open trades with a Stop value of 180 pips. The screen will look like this:

That's a pretty big difference, 58% chance of blow-up versus 2.1%. What's the difference? You can't see it on the setup screen but its the number of concurrent positions opened by the provider.

Why should Zulu so strongly consider the number of open positions? Its because Zulutrade is merely an interface which passes orders to the FCM for execution.

Consider the scenario where ZT sends a trade to the foreign currency merchant (FCM). FCM executes the order but for whatever reason the confirm doesn't make it back to ZT. Signal provider sends another order, but ZT's order limits are not honored because as far as ZT is concerned, you don't have a position open. From there it gets ugly and you can imagine what happens next.

Anyway,

How you can calculate your margin and be aware of Margin Calls:

I am having doubts as to the accuracy of the ZuluTrade Margin Call -o- Meter. So please be careful with it. In this case it may be over-cautious, which is not such a bad thing. It should be perfect though, when dealing with money.

According to my calculations below (see the screen shot), I believe there is a bug that the "Max Open Lots" factor is not correctly taken into account. Feel free to check my mathematics though !

So this is just a friendly reminder to anybody using ZuluTrade that it is probably best you understand how Margin is calculated, and what your individual brokers set their margin call ratio at. I believe FXDD broker is 100%.

I will briefly discuss how you can calculate your margin and be aware of Margin Calls. If you hit a margin call your broker WILL usually forcefully close all of your trades in progress, which may be devastating.

At present I am using 3 signal providers. I think it is prudent to always tick the "SAFE" over ride stop loss feature, in case they do not use a stop loss, to protect yourself. The amounts I have used are based on careful excel spreadsheet analysis. I also choose advanced currency options and untick the currencies that the signal providers rarely use, have bad results with, or never use, again to protect myself. For signal providers who trade various currencies, I will select individual Stop Losses, per currency, again based on excel spreadsheet analysis.

My concern is that I think the 153% margin, based on my $2000 USD account is inaccurate.

Worst case scenario here is if my 2 riskiest signal providers, get near their maximum drawdowns. Pro-B5 @ 190 pips and Creative Trading @ 450 pips.

I calculate GBP/JPY on a 10,000 (Mini) account to use $83 margin per 1 lot. Plus drawdown @ $1.06 per pip. Worst case scenario here with maximum drawdown (not including the cost of spreads) I calculate somewhere around $678. Which is more like 33% Margin used. Nowhere near the 153% Margin Call as quoted by ZuluTrade.

See screen shot below, I believe the ZuluTrade formula is faulty, and advise you to use caution, even if it is over cautious, it is best to know how to calculate this yourself. If you are not using the "Maximum Open Lots" feature, I believe it is more accurate.
 

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