Trade Stock Indices

What Happens When Free Stock Trading Margin Hits and Gets To Zero?

What Happens When Free Margin Runs Out?

A stop out happens when free margin falls below the broker's required level for indices. The account can't meet the margin needs. The broker then closes some open trades. This keeps going until the margin rises above the required level again.

Some of the trades open might get closed, or all of them might get closed completely if the broker does this stopout automatically.

What is Index Margin Requirements Level?

Now if Your Leverage is 100:1

The green book's first part covers key US economy shifts. It looks at growth, prices, rates, money flows, credit, and global links from recent months.

But this is only if your online broker has set Stock Indices Margin Requirements to 0% before automatically closing your stock trades using this Stop Out feature.

What is 20 % Index Account Margin Requirements Level?

If you need 20% margin for indices before your trades are automatically closed by a Stop Out, your trades will close when your account balance hits $200 dollars - you'll get a stop out at $200.

What is 50 percent Margin Requirements Level?

If you need 50% of this amount before you automatically sell your stock positions using a stopout, then your trades will be stopped when your account drops to $500 - you will get a stop out at $500.

What is 100 % Margin Requirements Level?

Should the broker mandate a 100% margin requirement at this level, triggering an automatic closure of your open positions via a Stop Out mechanism - say, at a balance of $1,000 - your stock trades will be instantly closed when your account equity falls to $1,000. This means that even executing a single standard lot on this trading account could cause trade positions to close immediately, as paying just one point spread would likely drop your account balance below $1,000, meeting the 100% margin requirement threshold ($1,000). Thus, your active positions will be instantly subjected to a Stop Out if the account's utilized margin level dips below the 100 percent threshold.

The majority of brokerage firms do not impose a 100% margin prerequisite, yet those that do insist on 100% margin are inherently disadvantageous for a trader's operational strategy: even those setting margins at 50% are less favorable. Prudent traders should seek out brokers mandating no more than a 20% margin requirement for stock indices. Indeed, brokers that set their margin requirement for Stock Indices at 20% are often superior choices, as this lower requirement substantially minimizes the probability of a trade being forcibly closed via a Stop Out procedure, as visually demonstrated in the accompanying graphic.

To learn more about leverage and stock index margins, refer to the index tutorials provided below:

Stock Leverage & Stock Index Margin Explained

Study More Lessons:

Stock Index Broker