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