Market execution
Caveo ensures that all orders are executed at the requested price by the client. However, trading during periods of rapid market activity, such as news events, economic releases, or other market catalysts, may result in swift price movements. As Caveo passes all trades directly to the market without intervention, a trade may be executed at a price higher or lower than the requested price. This occurs with complete transparency, whether it is in favor of the order or not. Caveo cannot control this, due to its fully automated execution system, which operates without any human intervention whatsoever.
Limit orders
Buy Limit
This order is activated when the bid price reaches the buy limit order. The order is executed at the next available price or rejected if there is no available price. The order is executed in full, but it may be executed at a better or worse price than the requested price.
Sell Limit
This order is activated when the ask price reaches the sell limit order. The order is executed at the next available price or rejected if there is no available price. The order is fully executed, but it may be executed at a better or worse price than the requested price.
Take Profit / Stop Loss
This order is activated when the closing price reaches the take profit/stop loss order. The order is executed at the next available price or rejected if there is no available price. The order is fully executed, but it may be executed at a better or worse price than the requested price.
Stop orders
Buy Stop
This order is activated when the ask price reaches the buy stop order. The order is executed at the next available price or rejected if there is no available price. The order is executed in full, but it may be executed at a better or worse price than the requested price. The same policy applies to trailing stop orders.
Sell Stop
This order is activated when the bid price reaches the sell stop order. The order is executed at the next available price or rejected if there is no available price. The order is fully executed, but it may be executed at a better or worse price than the requested price. The same policy applies to trailing stop orders.
Margin
The required margin is the minimum amount of capital required to open a trading position. It determines the maximum trade size you can execute based on the amount deposited in your trading account. When the required margin is less than the free margin in the current trading, it indicates that you can open more trading positions. Conversely, when the required margin exceeds the free margin, you may need to add more funds or close some positions to avoid Margin Call.
How the required margin is calculated:
Required Margin = Current Price x Contract Size x Number of Open Contracts x Leverage Value
When calculating the required margin for any currency pair, commodity, or stock index, please note the following:
- The required margin for a position change with the current price, even if it's a slight change.
- The required margin for a position change with changes in the contract size and the number of contracts.
- Leverage affects the value of the required margin for a position. The higher the leverage, the lower the required margin. It's preferable to maintain a higher margin for the trade. It's also important to understand the risks of using leverage.
Example 1: Let's assume you want to buy a standard contract of the EUR/USD pair at a price of 1.08488 with a leverage of 1:100.
Then the required margin = 1/100 x 100,000 x 1 x 1.08488 = 1084.88 $
Example 2: Let's assume you want to buy two mini contracts of the AUD/USD pair at a price of 0.65339 with a leverage of 1:400.
The required margin = 0.65339 x 1/400 x 100,000 x 0.2 = 32.66 $
Example 3: Gold (XAUUSD)
When a client has gold positions worth less than $5 million and adds new trades, increasing the total value of trades to $5 million or less than $8 million, the margin requirement increases by $0.2 million per ounce at the time of the new trade.
When a client has gold positions worth less than $8 million and adds new trades, increasing the total value of trades to $8 million or more, the margin requirement increases by $0.3 per ounce at the time of the new trade.
The value of trades is calculated as follows: number of contracts x 100 x price per ounce.Example: 40 gold contracts x 100 ounces x $1,320 per ounce = $5,280,000
Margin Level
It is an indicator that measures the ability to tolerate risks in the account and reflects the percentage of available margin compared to the margin used. When the margin level is high, it means you have sufficient margin to open new positions, while when it is low, it indicates a risk of automatic closure of trades.
Calculation of Margin Level:
Margin Level % = (Current Balance / Required Margin) * 100
Stop Out
In the event of a market movement against the client's positions, resulting in the margin level in the client's account falling below 50% or according to the client's account specifications, positions with the greatest losses (regardless of their size) will be liquidated first until the margin level returns to 50% or higher, or to the pre-defined level with the client. This will occur at the current market price, and all pending orders can be canceled. It is solely the client's responsibility to monitor their account and ensure that there are sufficient funds available at all times to withstand any potential losses, including those resulting from adverse price movements, including any unexpected significant price movements.
| Description | Margin Level |
|---|---|
| Normal situation | Margin Level ≥ 100% |
| Margin Call warning state | Margin Level < 100% |
| (Stop Out Level): Unprofitable trades are automatically closed until the margin level is restored above 50%. | Margin Level < 50% |
Example:
In the case of buying 4 standard contracts of the EUR/USD pair with leverage of 1:400, at the current price of 1.8474, and the required margin was $1084.74. Then, as the market movement turned against the client's trades, resulting in a loss of $303.11, the account status was as follows:
- Total balance: $641.13
- Current balance: $338.02
- Required margin: $746.90
- Free margin: -$408.88
- Profit: -$303.11
To calculate the margin level from the loss:
Margin level = (Current balance / Required margin) * 100
So, the margin level in the client's account = (338.02 / 764.90) * 100 = 44.20%
Here, we see that the margin level has dropped below 50%. Therefore, trades with the largest losses are automatically closed first (regardless of their size) until the margin level returns to 50% or higher.