What Happens if You Get a Margin Call?
A margin call occurs when a trader's account free margin goes below the required margin level which's set by broker. This means because the free margin in trader's account has dropped below the required margin level then the trader receives a margin call and some of the open trades or all of the open trades in the trader's are closed by broker til this account margin requirement level goes back up to a region above the required trading margin percent level.
Some of the open trade transactions may be stopped out or all of the open trade transactions may be closed-out if this margin call is automatically executed by the broker.
What's Margin Requirement Level?
Now if Your Leverage is 100:1
When trading if you have $1,000 & use leverage option of 100:1 & buy 1 standard lot for $100,000 your margin on this trade is $1000 in your account, this is money which you'll lose if your open trade transaction moves against you the other $99,000 that's borrowed, the online broker will close the open trade transactions automatically using a Gold Margin Call once your $1,000 has been taken out by market.
But this is if your broker has set 0 percent Margin Requirement before stopping out your gold trade transactions automatically using this Margin Call.
What's 20 percent Margin Requirement Level?
For 20 % margin requirement before closing your gold trades automatically using what is known as Margin Call, then your trades will be stopped out once your trading account balance reaches $200 - at $200 you will get a margin call.
What's 50 % Margin Requirement Level?
For 50 % requisite of this level before stopping out your gold trades automatically using what is known as margin call, then your transactions will be closed once your account balance gets to $500 - at $500 you will get a margin call.
What's 100 % Margin Requirement Level?
If the broker sets 100 % margin percentage level requirement of this level before automatically closing your open trade positions automatically using what is referred to as a margin Call - at $1,000 you will get a margin call, then your trades will be closed once your account balance gets to $1,000: Meaning the trade transactions will close-out as soon as you execute a one standard lot on this trading account because even if you pay one pips spread your account balance will get to $990 and the needed margin requirement percentage is 100 percent i.e. $1,000, hence your orders will immediately get closed using a Margin Call once your margin requirement falls below 100 percent.
Most brokers don't set 100 % margin requirement, but there are those brokers that set 100 % margin percent level requirement aren't suitable for you at all, even those that set 50 % margin requirement level are still not suitable. Choose those brokers that set their margin level requirement at 20 % margin level, in fact, those brokers which set their margin prerequisite at 20 % Margin Requirement are the best because the likelihood they close out your trade using a Gold Margin Call is reduced as shown in the above example.
To Learn and Know More about Leverage and Margin - Read the Topics Below:
Leverage and Margin Discussed
