Summary: - Topic and core idea: The episode explains free margin in copy trading and why avoiding forced closures hinges on keeping free margin sufficient (free margin = equity minus used margin). - Key definitions: balance, equity (balance plus floating P/L), used margin (broker’s hold to keep positions open), free margin, and margin level (equity divided by used margin × 100). If free margin falls low, a margin call or forced close can occur. - Practical question: Know your minimum margin level before liquidations with your broker; some platforms trigger alerts below certain levels and may begin staged liquidation. - Five actionable rules to avoid forced closures when copying with leverage: 1) Define a cushion: keep a margin level above a personal minimum (the author suggests >200% as a safe baseline; keep extra reserves for volatile assets like crypto). 2) Size by maximum drawdown: allocate capital so worst-case drawdown keeps you above your floor (e.g., use 1.5x safety factor, and avoid putting all capital into a strategy with high drawdown). 3) Diversify by non-correlation, not by quantity: mix across different assets and strategies so bad moves aren’t synchronized. 4) Set platform limits: impose rules like avoiding new trades when heavily loaded, daily/monthly loss limits, max size per instrument, and max open positions per trader. 5) Reserve for events: reduce risk before major news/events; consider pausing copying if your strategies aren’t built for high volatility. - Mini-tutorial (practical steps to act today): 1) Note current margin level and liquidation threshold. 2) Review each trader’s history (max drawdown, average simultaneous positions). 3) Estimate potential used margin from typical position sizes, number of positions, and instrument leverage. 4) Allocate capital so even in the worst recent scenario, margin stays above your floor. 5) Add a cushion for martingale/averaging-down strategies. 6) Set alerts for equity and margin; reduce exposure if triggered. - Additional notes: - In some platforms, copying is proportional to equity rather than free margin, which can risk too-small or late openings if you’re already committed elsewhere. - Investor psychology: when markets rise, don’t overextend; take profits or move risk to sub-accounts; in tricky markets, reduce risk early. - Overall takeaway: Align risk management concepts (risk, free margin, diversification, disciplined limits) to make copy trading robust and less prone to liquidations. - Final prompt: Consider what you will change today in your copy limits to raise your margin above your floor; implement and review weekly. Remeber you can contact me at andresdiaz@bestmanagement.org