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Serhii

How no stop loss will work for me with buy position on eToro?

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Hello. Please, help me to understand:

With the conditions:

  • Open BUY (Long) position
  • Leverage: x1
  • Initial Investment: 1,000 USD
  • APPLE STOCK (AAPL) Ask rate: 250 USD
  • Position: Open 4 units AAPL BUY


If I set no stop loss, should this mean that I lose all 1000 USD only in the case, when AAPL stock will drop to 0 USD (what is almost unreal)? 

e. i. with such a buy position the stop margin will be 100% of the $1000 investment?

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Hi Serhii

If Apple stock was to drop low enough to the point where you don't have enough margin in your account to cover your position then the broker will give you something called a margin call. They will either close your position immediately or ask you to deposit more funds into your account to cover the position. If you cannot cover it then the position will be closed by the broker. 

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Thanks for the question Serhii,

Stop-loss restrictions protect your capital from sharp market swings. They are mandatory for all positions except real assets and cryptocurrencies. eToro allows you to raise the stop-loss order beyond the specified limits when the trade opens. In the event of an extension, part of your balance will go into the trade thanks to the broker’s Maintenance Margin feature. Even so, a stop loss is impossible with insufficient funds. Suppose you trade with $1000, and the stop-loss limit stands at the 50% allowed maximum. The trade will end when your position reaches $500. However, an extra $500 will be drawn from your account if you decide to stretch the order to 100%. This translates to a $1000 stop loss and $1500 invested total. The additional $500 makes the maintenance margin. Though they eliminate the hassle of checking your holdings every day, stop-loss measures may trigger unnecessary sales during temporary price movements.
 

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