What Happens When Free Stock Margin Hits Zero?
What Happens When Free Trading Margin Runs Out?
A margin call is when a trader's account free margin goes below required margin level that is set by the online broker. This means that because the free margin in trader's account has gone below the required margin level then the trader gets a margin call and some of the open trades in trader's are closed by the online broker until this margin level goes back up to above required margin level.
Some of the open trades might be closed or all of the open trades may be closed if this margin call is automatically executed by broker.
What's Stock Margin Requirement Level?
Now if Your Leverage is 100:1
When trading if you have $1,000 & use leverage of 100:1 & buy 1 standard indices lot for $100,000 your margin on this trade transaction is $1000 in your account, this is the money that you'll lose is your open trade transaction moves against you the other $99,000 that's borrowed, broker will close-out the open trade transactions automatically using a Margin Call once your $1,000 has been taken by market.
But this is if your broker has set 0 % Indices Margin Requirement before closing out your stock trades automatically using this Margin Call.
What's 20% Indices Margin Requirement Level?
For 20 percent margin requirement before closing out your stock trades automatically using a Margin Call, then your trades will be closed once your trade account balance gets to $200 - at $200 you will get a margin call.
What's 50 % Indices Margin Requirement Level?
For 50 % prerequisite of this level before closing out your stock trades automatically using a margin call, then your transactions will be closed once your trade account balance gets to $500 - at $500 you'll get a margin call.
What's 100 % Indices Margin Requirement Level?
If broker sets 100% margin requirement of this level before closing out your open transactions automatically using a Margin Call - at $1,000 you'll get a margin call, then your stock trades will be closed once your trade account balance gets to $1,000: Meaning stock trades will close-out as soon as you execute a 1 standard stock indices lot on this account because even if you pay $10 spread your account balance will get to $990 and the needed margin requirement percentage is 100% that is 1,000 dollars, therefore your orders will immediately get closed using a Margin Call once your margin requirement falls below 100%.
Most brokers don't set 100 % margin requirement, but there are those brokers that set 100 % margin requirement level are not suitable for you at all, even those that set their requirement at 50% margin percentage level requirement are still not suitable. Select those brokers set 20% margin percentage level requirement, in fact, those brokers that set at 20% Indices Trading Margin Requirement are some of the best since due to the likely hood they stop out-out your trade using a Margin Call is reduced as shown in the examples above.
To Learn and Know More about Stock Leverage & Margin - How to Read the Learn Indices Topics Below:
Leverage and Margin Discussed
What's a Trade Plan? - Written Plan Example Template
Alternatives: Automated EA Trading or Copy and Paste Signals
