Margin Call Example
What Happens When Free Commodities Trading Margin Runs Out?
A margin call is when a commodity trader's account free margin goes below required margin level that is set by the broker. This means that because the free margin in the trader's account has gone below required margin level then the trader gets a margin call and some of the open trades in commodity trader's are closed by the broker until this margin level goes back up to above the required trading margin level.
Some of the open trades may be closed or all of the open trades might be closed if this margin call is automatically executed by the broker.
What's Commodity Trading Margin Requirement Level?
Now if Your Commodities Trading Leverage is 100:1
When trading if you have $1,000 and use leverage of 100:1 and buy 1 standard commodity lot for $100,000 your margin on this commodity trade transaction is $1000 dollars in your commodity account, this is money that you will lose is your open commodity trade goes against you the other $99,000 that's borrowed, the broker will close-out the open trades automatically using a Margin Call once your $1,000 has been taken by the commodities trading market.
But this is if your commodity broker has set 0% Commodities Margin Requirement before closing your commodities trades automatically using this Margin Call.
What's 20% Commodities Margin Requirement Level?
For 20% margin requirement before closing your commodities trades automatically using a Margin Call, then your commodities trade transactions will be closed once your trading account balance gets to $200 - at $200 you'll get a margin call.
What is 50% Commodities Margin Requirement Level?
For 50% requirement of this level before closing your commodities trades automatically using a margin call, then your transactions will be closed once your account balance gets to $500 - at $500 you'll get a margin call.
What is 100% Commodities Margin Requirement Level?
If the broker sets 100% margin requirement of this level before closing out your open trades automatically using a Margin Call - at $1,000 you'll get a margin call, then your commodities trades will be closed once your account balance gets to $1,000: Meaning the commodities trades will close-out as soon as you execute a 1 standard commodity lot on this commodities trading account because even if as a trader you pay 10 dollars spread your commodity trading account balance will get to $990 & the needed margin requirement percentage is 100% that is 1,000 dollars, therefore your commodity orders will immediately get closed using a Margin Call once your margin requirement falls below 100%.
Most commodity brokers do not set 100% margin requirement, but there are those commodities brokers that set 100% margin are not suitable for you at all, even those who set their requirement at 50% trading margin percentage level requirement are still not suitable. Select those commodity brokers set 20% margin percentage level requirement, in fact, those commodity brokers that set at 20% Commodities Trading Margin Requirement are the best because the likely hood they closeout your trade using a Margin Call is reduced as shown in the example above.
To Learn More about Commodities Leverage & Margin - How Do You Read the Learn Commodity Trading Topics Below:
Commodities Leverage & Margin Lesson
