What Happens When Free Stock 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 indices margin level that is set by the online broker. This means that because the free margin in the trader's account has gone below required indices margin level then the trader gets a margin call and some of the open trades in trader's are closed by the online broker until this margin level goes back up to above required indices 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 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 a trade - your margin on this trade transaction 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 Stock Margin Call once your $1,000 has been taken by the market.
But this is if your broker has set 0 % Indices Margin Requirement before closing out your stock trades automatically using this Margin Call.
What's 20% Indices Margin Requirement Level?
For 20% indices margin requirement before closing 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 margin call.
What's 50 % Indices Margin Requirement Level?
For 50 % prerequisite of this level before closing out your stock trades automatically using a margin call, then your open trade transactions will be closed once your account balance gets to $500 - at $500 you will get a margin call.
What's 100 % Indices Margin Requirement Level?
If the online broker sets 100 % indices margin requirement of this level before closing out your open transactions 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 trading account because even if you pay 1 point spread your account balance will get to below $1,000 and needed indices margin requirement % is 100 % i.e. 1,000 dollars, therefore your orders will immediately get closed using a Stock Margin Call once your margin requirement falls below 100%.
Most brokers don't set 100 % indices margin requirement, but there are those brokers that set 100 % indices margin aren't suitable for you at all, even those who set 50 % indices margin requirement are still not suitable. Select those set 20 percent margin trading requirements, in fact, those brokers that set at 20% Indices Margin Requirement are some of the best because the likelyhood they close out-out your trade using a Stock Margin Call is reduced as shown 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
