What's Margin Call Forex? - What is Forex Margin Call? - Margin Call Definition
A margin call is when a forex trader's account free margin goes below the required margin level that's set by the broker. This means that because the free margin in the trader's account has gone below required margin level then trader gets a margin call and some of the open trades in the trader's are closed by the FX broker until this account margin requirement level goes back up to a region above the required margin percent level.
Some of the open trades may be closed out or all of the open trades may be closed if this margin call is automatically executed by the broker.
What is Margin Requirement Level?
Now if Your Forex Trading Leverage is 100:1
When trading if you have $1,000 & use leverage option of 100:1 and buy 1 standard lot for $100,000 your margin on this trade is the $1000 dollars in your forex account, this is the money that you will lose if your open trade goes against you the other $99,000 that is borrowed, the broker will close the open trades automatically using a Forex Margin Call once your $1,000 has been taken by the market.
But this is if your forex broker has set 0% Margin Requirement before closing your trades automatically using this Margin Call.
What is 20% Margin Requirement Level?
For 20% margin requirement before closing your trades automatically using a Margin Call, then your transactions will be closed once your account balance gets to $200 - at $200 you'll get a margin call.
What is 50% Margin Requirement Level?
For 50% requirement of this level before closing your trades automatically using a margin call, then your trade transactions will be closed out once your trading account balance gets to $500 - at $500 you'll get a margin call.
What is 100% Margin Requirement Level?
If the broker sets 100% margin requirement of this level before closing out your open positions automatically using a Margin Call - at $1,000 you'll get a margin call, then your forex trades will be closed once your account balance gets to $1,000: Meaning the forex trades will close-out as soon as you execute a 1 standard lot on this account because even if you pay a 1 pips spreads your forex account balance will get to $990 and the needed margin requirement percentage is 100% i.e. 1,000 dollars, therefore your open forex trade orders will immediately get closed using a Margin Call once your margin requirement falls below 100%.
Most forex brokers do not set 100% margin requirement, but there are those FX brokers that set 100% margin percent level requirement aren't suitable for you at all, even those that set 50% margin requirement level are still not suitable. Choose those brokers set their margin requirement at 20% margin requirement level, in fact, those who set at 20% Margin Requirement are the best because the likely hood they close-out your trade using a Forex Margin Call is reduced as shown in the example above.
To Learn More about Forex Leverage and Margin - Read the Topics Below:
Forex Leverage and Margin Explained
