What Happens if You Get a Margin Call?
A margin call occurs when a xauusd trader's account free margin falls below the required margin level which is 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 & 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 positions may be stopped out or all of the open trade positions may be closed out if this margin call is executed automatically by the broker.
What is Margin Requirement Level?
Now if Your Leverage is 100:1
When trading if you have $1,000 & use leverage ratio of 100:1 & open buy for 1 standard lot worth $100,000 dollars your margin on this trade is $1000 in your account, this is money which you will lose if your open trade position goes against you : the other $99,000 dollars that's borrowed, the online broker will close out the open trade positions mechanically/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 mechanically/automatically using this Margin Call.
What's 20 percent Margin Requirement Level?
For 20 % margin requirement before closing your gold trade positions mechanically using what is known as Margin Call, then your trades will be stopped out once your account balance reaches $200 - at $200 you'll receive a margin call.
What's 50 % Margin Requirement Level?
For 50 % requisite of this level before stopping out your gold trade positions mechanically using what is known as margin call, then your transactions will be closed once your account balance gets to $500 - at $500 you'll receive a margin call.
What's 100 % Margin Requirement Level?
If the online broker sets 100 % margin percentage level requirement of this level before automatically closing your open positions mechanically/automatically using what is referred to as a margin Call - at $1,000 you'll receive 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 % is 100 % i.e. $1,000, henceforth your open trade positions will immediately get closed using a Margin Call once your trading account margin requirement falls and drops below 100 percentage.
Most brokers do not set 100 % margin requirement, but there are those brokers that set 100 percent margin % level requirement are not suitable for you at all, even those that set 50 % margin requirement level still are not suitable and good enough. Choose & Select those online brokers that set the account margin level requirement at 20 % margin level, in fact, those brokers that set their trading margin requirement at 20 % Margin Requirement are the best because the likelihood they close out your trade using a Gold Margin Call is reduced and minimized just as is shown in the above illustration.
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Leverage and Margin Discussed
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