What Happens When Free Stock Margin Hits Zero?
What Happens When Free Indices Margin Runs Out?
A trade stop out is when a trader's account free indices margin drops below the required margin level that is set by broker. This means that because the free indices margin in trader's account has gone below required margin level then the trader gets a indices stopout and some of the open trades in trader's are closed by broker until this indices margin level goes back up to above required margin level.
Some of the open trades might be closed or all of the open trade transactions may be closed-out if this stock indices stopout is automatically executed by broker.
What's Stock Margin Requirements Level?
Now if Your Leverage is 100:1
When trading if you have $1,000 dollars & use leverage of 100:1 & buy 1 standard lot for $100,000 dollars your indices margin on this trade 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 Indices Stop-Out once your $1,000 dollars has been taken out by the stock market.
But this is if your online broker has set 0 % Margin Requirements before liquidating your stock trade transactions automatically using this Indices Stop Out.
What's 20% Margin Requirements Level?
For 20% margin requirement before stopping out your stock trade transactions automatically using a Indices Stop Out, then your trades will be stopped out once your trade account balance reaches $200 - at $200 you will get a indices stop out.
What's 50% Margin Requirements Level?
For 50% requisite of this level before stopping out your stock trades automatically using a indices stopout, then your trades will be stopped out once your trade account balance reaches $500 - at $500 you'll get a indices stop out.
What's 100% Margin Requirements Level?
If the broker sets 100% margin requirement of this level before stopping out your open transactions automatically using a Indices Stop Out - at $1,000 you will get a indices stop out, then your stock trade transactions will be closed once your trade account balance gets to $1,000: Meaning stock trade transactions 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 trading account balance will get to below $1,000 and needed margin requirement % is 100 % that's $1,000 dollars, therefore your orders will immediately get liquidated using a Indices Stop Out once your indices margin requirement falls below 100%.
Most brokers do not set 100 % margin requirement, but there are those brokers that set 100 % margin aren't good-enough for you at all, even those who set 50 % margin requirement are still not good-enough. Select those set 20 percent indices margin requirements, in fact, those brokers that set at 20% Margin Requirement are some of the best because the likelihood they close out your trade using a Indices Stop Out is reduced as shown in the example above.
To Learn & Know More about Leverage and Margin - How to Read the Learn Topics Below:
Stock Leverage & Margin Explained
