Results 1 to 6 of 6
 0 Attachment(s)    

Thread: What’s a Margin Call and Should I be Afraid of one?

  1. #1
    Banned
    Join Date
    Aug 2014
    Posts
    924

    Default What’s a Margin Call and Should I be Afraid of one?

    A margin call is what happens when you have no money left in your account. To protect you from losing more money than you have your broker closes out your positions. This means you can never lose more money than you have in your account.

    Before learning what a margin call is you need to know the definitions of two terms.

    Used Margin: The amount of money in your account that is currently used in open trades. If you have $6,000 capital in an account and you have $1,000 in an open trade then your used margin is $1,000. If you have $3,000 capital in an account and you currently have $600 in an open trade your used margin is $600.

    Usable Margin: The amount of money in your account minus any open trades. We will continue from the same examples used above. If you have $6,000 capital in an account and you have $1,000 in an open trade your usable margin is $5,000. If you have a $3,000 capital in an account and you currently have $600 in an open trade your usable margin is $2,400.

    When your usable margin reaches $0 your broker will automatically margin call you. With good money management this should never happen but newbies can slip up.

    Below are a few examples of margin calls:

    Tom opens a standard Forex account with $4,000 and 100:1 leverage. This means that on each trade Tom must enter a minimum of 100,000 units ($100,000). With 100:1 leverage Tom must enter $1,000 of his own money to each trade.

    Tom analyzes GBP/USD and decides that the pair is going up. He opens a long position with 2 standard lots on GBP/USD. This means Tom is trading $2,000.

    Disaster strikes GBP/USD goes down instead of up. Tom curses himself for taking a long but he keeps the position open. If Tom keeps the position open and it moves too far against him he will get a margin call.

    Before Tom opens his position he has $4,000 in usable margin. After opening a position with 2 standard lots ($2,000) his used margin became $2,000 and his usable margin became $2,000. If GBP/USD drops by too many pips and Toms useable margin reaches $0 his broker will close out his trade. This protects Tom from losing more money than he has in his account.

    Another example:

    Mary opens a mini Forex account with $1,000 at 100:1 leverage. She analyzes EUR/USD and decides to go short. Mary enters 7 mini lots ($700) short on EUR/USD. Before entering the positions, Mary’s usable margin was $1,000. Now that she is in the trade her usable margin is $300.

    Again disaster strikes and Mary’s trade goes against her. If Mary’s usable Margin reaches $0 her trade is automatically closed, so she cannot lose more money that she has in the account.

    Margin calls are easily avoided if you trade sensibly. However, this is more advanced stuff that you will learn later, Apprentice Ninja.

    It is very important that you check what the margin polices are with your broker. Margin policies can differ from broker to broker so if you plan to open an account remember to ask.

  2. #2
    Banned
    Join Date
    Dec 2013
    Posts
    353

    Default

    I think margin call should give trader a very obvious sign that something is wrong and you need to recheck everything you do and how you do. But that also gives a very big dose of scares however that is part of margin call and I think avoid scares is pretty impossible. I think somehow margin call could give brave but only to make changes in trading and become better after such disappointing thing.

  3. #3
    Banned
    Join Date
    Nov 2014
    Posts
    61

    Default

    Margin Call: a warning from a broker that your account has slipped past the required margin in %, and that there is not enough equity (floating profits - floating losses + unused balance) on the account to support your Open trades any further.It has often been suggested that one should use stop-orders on every position to limit risk, and these can helpful, but keeping the leverage size low relative to your account balance is the best money management strategy

  4. #4
    Banned
    Join Date
    Dec 2013
    Posts
    286

    Default

    Margin call is the risk in forex, we must be able to manage our fund so we will get maximal result, not get margin call when trading. Try to use small amount to make us be better in managing money in forex. We must know that forex is not easy and there is risk which we should minimize

  5. #5
    Banned
    Join Date
    Nov 2014
    Posts
    61

    Default

    an example with stop-out information would lead a better understanding
    here's another example with MClevel and SO level taking into consideration :
    You have an account with a broker that has 50% margin call level and 20% stop-out level. Your balance is $10,000 and you open a trading position with $1,000 margin. If the loss on a position reaches $9,500, your account equity becomes $10,000 — $9,500 = $500, which is 50% of your used margin, the broker will issue a margin call warning. When your loss on a position reaches $9,800 and your account equity becomes $10,000 — $9,800 = $200, which is 20% of the used margin, the stop-out level will be triggered and the broker will automatically close your losing position.
    have check with the brokers trading condition, different brokers giving vary margin calll level and stop out level, well got one account with armada markets given condition Margin call / stop-out: 100% / 30%.

  6. #6
    Banned
    Join Date
    Nov 2014
    Posts
    116

    Default

    Margin call is risk in a forex trading. I think everyone are in forex also experienced it because i also experienced it. The most important is we want to learn from our experience to make us be better trader. Mistake we have done and made us get margin call must be learned too.

Similar Threads

  1. Margin and Lots
    By painofhell in forum Trading discussion
    Replies: 1
    Last Post: 09-01-2014, 08:54
  2. Function Call from MQL to Excel fields
    By Dutchess in forum MQL programming
    Replies: 3
    Last Post: 08-19-2010, 13:44
  3. Function call problem
    By jeandl in forum MQL programming
    Replies: 3
    Last Post: 02-28-2009, 10:01

Tags for this Thread

100, broker, brokers, eur, eur/usd, forex, forex account, forex trading, gbp, learn, low, money, pips, stop, strategy, support, trader, trading, usd

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •