What is Margin Call Forex? - What is Forex Trading Margin Call? - Margin Call Definition
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 FX broker until this trading margin percentage level goes back up above the required margin percent area.
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 trading broker.
What is Margin Requirement Level?
Now if Your FX Trading 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 dollars in your forex account, this is the money that you will lose if your open trade goes against you the other $99,000 that is borrowed, the 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% Margin Requirement before closing your trades automatically using this Margin Call.
What's 20% Margin Requirement Level?
For 20% margin requirement before closing your trades automatically using a Margin Call, then your transactions will be closed once your account trading balance gets to $200 - at $200 you'll get a margin call.
What is 50% Margin Requirement Level?
For 50% requirement of this level before closing your 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 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 account balance gets to $1,000: Explanation the forex trades will close-out as soon as you execute a 1 standard lot on this account because even if you pay a One pip spreads your forex account balance will get to $990 & the needed margin requirement percent is 100% i.e. 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 their margin requirement level at 100 percent trading margin are not suitable for you at all, even those forex brokers that set 50% margin requirement level are still not suitable. Choose those brokers set their margin requirement at 20% margin requirement level, in fact, those brokers that set it at 20% 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 Topics Below:
Forex Leverage & Margin Described
