What's Margin Call Meaning? - Margin Call Explained - Margin Call Example
What Happens When Free FX Trading Margin is Negative? - What Happens When Your Free Forex Trading Margin Runs Out?
A margin call is when a forex trader's account free margin goes below required margin level that is set by forex broker. This means that because the free margin in forex trader's account has gone below required margin level then trader gets a margin call & some of the open trades in forex trader's are closed by the broker until this margin level goes back up to above required margin trading 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 forex broker.
What is Margin Requirement Level?
Now if Your Forex Leverage is 100:1
When trading if you have $1,000 and use leverage of 100:1 and buy 1 standard forex lot for $100,000 your margin on this forex trade transaction is $1000 dollars in your forex account, this is the money that you will lose is your open forex trade goes against you the other $99,000 that is borrowed, forex broker will close out the open trades automatically using a Margin Call once your $1,000 has been taken by the market.
But this is if your forex broker has set 0% Margin Requirement before closing your forex trades automatically using this Margin Call.
What's 20% Margin Requirement Level?
For 20% margin requirement before closing your forex trades automatically using a Margin Call, then your forex trades will be closed once your account balance gets to $200 - at $200 you will get a margin call.
What is 50% Margin Requirement Level?
For 50% requirement of this level before closing your forex trades automatically using a margin call, then your transactions will be closed once your account trading balance gets to $500 - at $500 you'll get a margin call.
What is 100% Margin Requirement Level?
If 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 forex trades will be closed once your forex account balance gets to $1,000: Meaning the forex trades will close-out as soon as you execute a 1 standard forex lot on this forex account because even if you pay 10 dollars spreads your forex account balance will get to $990 & the needed margin requirement percent is 100% that is 1,000 dollars, therefore your open forex trade orders will immediately get closed using a Margin Call once your margin requirement falls below 100%.
Most forex brokers do not set 100% margin requirement, but there are those FX brokers that set 100% trading margin requirement level aren't suitable for you at all, even those forex brokers that set 50% margin requirement level are still not suitable. Select those brokers set a 20% margin percent level requirement, in fact, those brokers that set it at 20% 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 Forex Leverage & Margin - Read the Learn Forex Topics Below:
Forex Leverage & Margin Explained
