What Happens When Free Stock Trading Margin Hits and Gets To Zero?
What Happens When Free Stock Indices Margin Runs Out?
A trade stop out is when a trader's account free indices margin drops and falls 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 online 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 indices stop-out is executed automatically by broker.
What is 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 if your open trade transaction goes against you : the other $99,000 that's borrowed, broker will close-out the open trade transactions mechanically/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 percent% Margin Requirements before closing outliquidating your stock trade positions mechanically by using this Indices Stop Out.
What's 20% Margin Requirements Level?
For 20% margin requirement before stopping out your stock trade positions mechanically by using a Indices Stop Out, then your positions will be stopped out once your trade account balance reaches $200 - at $200 you will get a indices stop out.
What is 50 % Margin Requirements Level?
For 50% requisite of this level before stopping out your stock trades mechanically by using a indices stopout, then your positions 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 for this level before closing outliquidating your open positions mechanically by using a Indices Stop Out - at $1,000 you will get a indices stop out, then your stock trade positions will be closed once your trade account balance gets to $1,000: Meaning stock trade positions 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 are not good-enough for you at all, even those who set 50 % margin requirement still are not good enough. Select those set 20 percent indices margin requirements, in fact, those brokers that set at 20% Margin Requirement are among the best because the likelihood they close out your trade using a Indices Stop Out is reduced and minimized as shown on the exemplification above.
To Learn & Know More about Leverage and Margin - How to Read the Learn Topics Below:
Stock Leverage & Margin Explained
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