What Happens When Free Margin Hits Zero?
What Happens When Free Margin Runs Out?
A indices margin call is when a trader's account free margin goes below the required margin level that's set by the broker. This means that because the free margin in the trader's account has gone below required margin level then 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 required 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 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 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 trades automatically using a Trading Margin Call once your $1,000 has been taken by the stock trading market.
But this is if your broker has set 0% Indices Trading Margin Requirement before closing out your stock trades automatically using this Trading Margin Call.
What's 20% Indices Margin Requirement Level?
For 20% indices margin requirement before closing your stock trades automatically using a Trading Margin Call, then your trades will be liquidated once your account balance drops to $200 - at $200 you'll get a margin call.
What's 50 percent Margin Requirement Level?
For 50 % requirement of this level before liquidating 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 will get a margin call.
What's 100 Percent Margin Requirement Level?
If the broker sets 100 Percent margin requirement of this level before closing your open trades automatically using a Trading 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 stock account because even if you pay 1 point spread your account balance will go to below $1,000 & needed margin requirement percentage is 100 Percent i.e. 1,000 dollars, therefore your orders will immediately get closed using a Trading 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 margin aren't suitable for you at all, even those who 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 because the likely-hood they liquidate-out your trade using a Trading Margin Call is reduced as pictured in the example above.
To Learn and Know More about Stock Leverage and Trading Margin - How to Read the Learn Topics Below:
Leverage and Trading Margin Described
What's a Trade Plan? - Written Plan Example Template
Alternatives: Automated EA Trading or Copy and Paste Signals
