What is Forex Margin Call Definition? - What Happens When Free Forex Margin Hits Zero?
What Happens When Your Free Forex Trading Margin Runs Out?
A forex margin call is when a forex trader's account free forex margin goes below the required forex margin level that is set by the broker. This means that because the free forex margin in the trader's account has gone below required forex margin level then trader gets a forex margin call & some of the open trades in forex trader's are closed by the broker until this forex margin level goes back up to above required forex trading margin level.
Some of the open trades might be closed or all of the open trades may be closed-out if this forex margin call is automatically executed by forex trading broker.
What is Forex Margin Requirement Level?
Now if Your Forex Trading Leverage is 100:1
When trading if you have $1,000 & use leverage of 100:1 & buy 1 standard forex lot for $100,000 your forex 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's borrowed, forex broker will close out the open trades automatically using a Forex Margin Call once your $1,000 has been taken by the market.
But this is if your forex broker has set 0% Forex Margin Requirement before closing your forex trades automatically using this Margin Call.
What's 20% Forex Margin Requirement Level?
For 20% forex margin requirement before closing your forex trades automatically using a Forex Margin Call, then your forex trades will be closed once your account balance gets to $200 - at $200 you will get a forex margin call.
What is 50% Forex Margin Requirement Level?
For 50% requirement of this level before closing your forex trades automatically using a FX trade margin call, then your trades will be closed once your FX account balance gets to $500 - at $500 you will get a forex margin call.
What is 100% Forex Margin Requirement Level?
If the broker sets 100% forex margin requirement of this level before closing your open trades automatically using a Forex Margin Call - at $1,000 you'll get a forex trading margin call, then your forex trades will be closed once your forex trading 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 spread your forex account balance will get to $990 and the needed forex margin requirement percent is 100% that's 1,000 dollars, therefore your forex orders will immediately get closed using a Forex Margin Call once your forex margin requirement falls below 100%.
Most forex brokers do not set 100% forex margin requirement, but there are those forex brokers that set 100% forex margin requirement are not suitable for you at all, even those that set 50% forex margin requirement are still not suitable. Choose those set 20% FX trade margin requirements, in fact, those brokers that set it at 20% Forex Margin Requirement are the best because the likely hood they close-out your trade using a Forex Margin Call is reduced as shown in the example above.
To Learn More about Forex Leverage and Margin - Read the Learn Forex Topics Below:
Forex Leverage & Margin Discussed
