Trade Stock Indices

Consequence When Free Stock Trading Margin Reaches and Becomes Exhausted (Zero)

What Happens When Free Trading Margin Runs Out?

A margin call is when a stock indices trader's trading account free margin moving below the required margin level that's set by broker. This means that because 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 trade transactions in trader's are closed by broker until this margin level goes back up to above required margin level.

Some of the open trades might be ended, or all of them could be ended if the broker automatically does this margin call.

What is Index Margin Requirements Level?

Now if Your Leverage is 100:1

In trading, start with $1,000 and a 100:1 ratio to control a $100,000 standard indices lot. Your account holds $1,000 as margin for this deal. That's the cash at risk if the trade turns bad. The broker borrows the other $99,000. It shuts the position with a margin call once the market wipes out your $1,000.

However, this only happens if your online broker has set the Indices Margin Requirements at 0 percent before they close your stock trades for you by using something called a Margin Call.

What's 20% Stock Indices Margin Requirements Level?

For a 20% margin requirement, your stock trades close automatically if your account drops to $200. That's when you get a margin call.

What's 50 % Indices Margin Requirements Level?

For this level, you need 50% equity before a margin call closes your stock positions. Trades shut down when your account balance hits $500. At that point, you receive the margin call.

What's 100% Index Margin Requirements Level?

If broker sets 100% margin requirement for this level before closing outliquidating your open positions mechanically/automatically by using a Margin Call - at $1,000 you will get and receive a margin call, then your stock trade positions will be closed once your trade account balance drops to $1,000: Meaning stock trade positions will close-out as soon as you execute a 1 standard 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, thenceforth your open positions will immediately get closed using a Margin Call once your account margin requirement drops below 100%.

The majority of brokers do not mandate a 100% margin requirement, but those that do are unsuitable. Even brokers setting their requirement at the 50% margin level are generally inadequate. Favor brokers whose margin requirement is set at 20%. In fact, brokers establishing a 20% Indices Margin Requirement are among the superior choices because this setting substantially minimizes the probability of your trade being closed via a Margin Call, as demonstrated in the preceding examples.

To Acquire Deeper Understanding of Stock Leverage and Margin Requirements - Review the Indices Tutorials Listed Below:

Discussing Leverage and Margin

Study More Lessons:

Stock Index Broker