Indices Margin Call Discussed
What Happens When Free Margin Runs Out?
A indices margin call is when a trader's account free margin drops below the required indices margin level which is set by the online broker. This means that because free margin in trader's account has dropped below required indices margin level then the trader gets a margin call & some of the open trades in trader's are closed by the online broker until this margin level goes back up to above the required indices margin level.
Some of the open trades might be closed or all of the open trades might be closed-out if this margin call is automatically executed by trading broker.
What is Stock Margin Requirements Level?
Now if Your Leverage is 100:1
When trading if you have $1,000 dollars and use leverage ratio of 100:1 and buy 1 standard lot for $100,000 your margin on this trade is $1000 dollars in your account, this is the money that you will lose is your open trade moves against you the other $99,000 that is borrowed, stock broker will close-out the open trades automatically using a Margin Call once your $1,000 has been taken by the trading market.
But this is if your online broker has set 0 percent Margin Requirements before closing out your stock trades automatically using the Margin Call.
What is 20% Indices Margin Requirements Level?
For 20% indices margin requirement before liquidating your stock trade transactions automatically using what's known as Margin Call, then your trades will be closed once your account balance gets to $200 - at $200 you'll get a margin call.
What is 50 % Margin Requirements Level?
For 50 % requisite of this level before closing out your stock trade transactions automatically using what's known as margin call, then your trades will be stopped out once your trade account balance reaches $500 - at $500 you will get a margin call.
What is 100 % Margin Requirements Level?
If the online broker sets 100 % margin requirement of this level before closing out 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 stop out as soon as you execute a 1 standard contract on this account because even if you pay $10 dollars spread your trading account balance will get to $990 and needed indices margin requirement percent is 100 % that is $1,000, therefore your orders will immediately get closed out using a Margin Call once your margin requirement falls below 100%.
Most online brokers do not set 100% indices margin requirement, but there are those brokers that set 100% indices margin are not suitable for you at all, even those who set 50% indices margin requirement are still not good. Select those set 20 % indices margin requirements, in fact, those brokers that set at 20% Indices Margin Requirement are some of the best because the likelihood they close out your trade using a Margin Call is reduced as pictured in the above example.
To Learn and Know More about Leverage & Indices Margin - How to Read the Learn Indices Guides Below:
Leverage & Indices Margin Explained
