Indices Margin Risk
Negative Free Margin Indices Trading
A Indices Margin call is when a trader's account free Stock Margin goes below the required Stock Margin level that is set by the broker. This means that because the free Margin in the trader's account has gone below required Stock Margin level then the trader gets a Margin call and some of the open trades in trader's are closed by the broker until this Margin level goes back up to above the required Stock Margin level.
Some of the open trades may be closed or all of the open trades might be closed-out if this Margin call is automatically executed by the 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 lot for $100,000 your Stock Margin on this trade transaction is $1000 in your account, this is the money that you will 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 Stock Margin Call once your $1,000 has been taken by the trading market.
But this is if your broker has set 0% Indices Margin Requirement before stopping out your stock trades automatically using this Margin Call.
What's 20% Indices Margin Requirement Level?
For 20% Indices 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 Stock Margin call.
What's 50 percent Margin Requirement Level?
For 50 % prerequisite of this level before closing out your stock trades automatically using a Stock Margin call, then your transactions will be stopped out once your balance gets to $500 - at $500 you will get a Stock Margin call.
What's 100 Percent Margin Requirement Level?
If the broker sets 100 Percent Margin Requirement of this level before closing out your open trade positions automatically using a Stock 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 lot on this account because even if you pay 1 point spread your account balance will get to below $1,000 and needed Indices Margin Requirement percent is 100 percent i.e. 1,000 dollars, therefore your orders will immediately get closed using a Stock Margin Call once your Margin Requirement falls below 100 percent.
Most brokers do not set 100 Percent Margin Requirement, but there are those brokers that set 100 Percent Stock Margin are not suitable for you at all, even those that set 50 percent Margin Requirement are still not suitable. Choose those set 20% Indices Margin Requirements, in fact, those brokers that set at 20% Indices Margin Requirement are some of the best since due to the likely hood they stop out-out your trade using a Stock Margin Call is reduced as pictured in the example above.
To Learn and Know More about Leverage & Stock Margin - How to Read the Learn Indices Topics Below:
Stock Leverage & Stock Margin Described
What's a Trade Plan? - Written Plan Example Template
Alternatives: Automated EA Trading or Copy and Paste Signals
