Margin Call Definition
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 & 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 may be closed if this margin call is automatically executed by the broker.
What is Commodities Trading Margin Requirement Level?
Now if Your Commodity Trading Leverage is 100:1
When trading if you have $1,000 & use commodity leverage option of 100:1 & buy 1 standard lot for $100,000 your margin on this trade is $1000 dollars in your commodities trading account, this is money which you'll lose if your open trade goes against you the other $99,000 that is borrowed, the broker will close the open commodity trade transactions automatically using a Commodity 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 Trading Margin Requirement Level?
For 20% margin requirement before closing your commodities trades automatically using a Margin Call, then your transactions will be closed once your account balance gets to $200 - at $200 you'll get a margin call.
What is 50% Commodities Trading 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 Trading Margin Requirement Level?
If the broker sets 100% margin requirement of this level before automatically closing your open trade transaction positions automatically using what is known as 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 lot on this commodities trading account because even if as a trader you pay 1 point spread your commodity trading account balance will go to below $1,000 & the needed margin requirement percentage is 100% i.e. 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 don't set 100% margin requirement, but there are those commodities brokers that set 100% margin are not suitable for you at all, even those that set their requirement at 50% margin percent level requirement are still not suitable. Select the ones that 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 close-out your trade using a Commodity Margin Call is reduced as shown in the example above.
To Learn More about Commodity Leverage and Margin - How Do You Read the Topics Below:
Commodities Leverage & Margin Tutorial
