What Happens When Free Margin Hits Zero?
What Happens When Free XAUUSD Margin is Negative?
A stop out is when a trader's account free margin drops below the required margin level which is set by online broker. This means because free margin in the trader's account has dropped below the required margin level then the trader gets a stop out & some of the open trades in trader's are closed by online broker until this margin level goes back up to above the required margin level.
Some of the open trades may be closed out or all of the open trades might be closed-out if this stop out is automatically executed by gold broker.
What's Margin Requirements Level?
Now if Your Gold Leverage is 100:1
When trading if you have $1,000 and use leverage ratio of 100:1 and buy 1 standard lot for $100,000 your margin on this trade transaction is the $1000 in your account, this is money which you will lose is your open trade transaction goes against you the other $99,000 that's borrowed, the broker will close out the open trades transactions automatically using a StopOut once your $1,000 has been taken by market.
But this is if your online broker has set 0% Trading Margin Requirements before closing out your gold trades automatically using this Stop Out.
What's 20 % Margin Requirements Level?
For 20% margin requirement before closing out your gold trades automatically using a Stop Out, then your trades will be closed once your account balance gets to $200 - at $200 you'll get a trade stop out.
What's 50 percent Margin Requirements Level?
For 50 percent prerequisite of this level before closing out your gold trades automatically using a stop out, then your trades will be closed out once your balance reaches $500 - at $500 you will get a trade stop out.
What's 100 Percent Trading Margin Requirements Level?
If the broker sets 100 Percent margin requirement of this level before closing out your open transactions automatically using a Stop Out - at $1,000 you will get a stop out, then your trades will be closed once your trading account balance gets to $1,000: Meaning the trade transactions will stop out as soon as you as a trader execute a 1 standard contract on this account because even if you pay one pips spread your account balance will get to $990 and the needed margin requirement % is 100 Percent that is $1,000, hence your orders will immediately get liquidated using a Stop Out once your margin requirement falls below 100 %.
Most online brokers don't set 100% margin requirement, but there are those brokers that set 100% margin are not good-enough for you at all, even those that set 50% margin requirement are still not good-enough. Choose those set 20 % margin requirements, in fact, those brokers which set their margin requirement at 20 % Margin Requirements are the best because the likely hood they liquidate your open trade using a Stop Out is reduced as shown in the examples above.
To Learn and Know More about Leverage and Margin - Study the Learn Courses Described Below:
Leverage and Margin Described
