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What Happens When Your Free Trading Margin Gets To Zero?

What Happens When the Free Margin in Your Trade Account is Negative?

A margin call is when a trader's account free margin falls below the required margin level which is set by the online broker. This means that because the free margin in the trader's account has gone below the required margin level then the trader gets a margin call and some of the open trades in gold trader's are closed by the online broker until this margin level goes back upto above the required 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 the online broker.

What is Margin Requirement Level?

Now if Your Leverage is 100:1

When trading if you as a trader have $1,000 & use leverage ratio of 100:1 & buy a trade position - your margin on this trade transaction is the $1000 in your account, this is the money that you will lose out if your open position goes against you & the other $99,000 which's borrowed, the broker will closeout the open position positions mechanically using a Margin Call once your $1,000 has been taken out by the market.

But this is if your online broker has set 0% Margin Requirement before closing out your trades mechanically/automatically using the Margin Call.

What's 20% Margin Requirement Level?

For 20% margin requirement before closing out your trades mechanically using what is known as a Margin Call, then your trade positions will be closed once your account balance gets to $200 - at $200 you'll get a margin call.

What's 50% Margin Requirement Level?

For 50 % requisite of this level before liquidating your positions mechanically using a trade position margin call, then your transactions will be closed once your account balance gets to $500 - at $500 you'll get a margin call.

What is 100% Margin Requirement Level?

If the online broker sets 100% margin requirement of this level before liquidating your open position positions mechanically/automatically using a Margin Call - at $1,000 you'll get a margin call, then your trade positions will be closed once your trading account balance reaches $1,000: Meaning the trade transactions will closeout as soon as you execute a 1 standard lot on this account because even if you as a trader you pay $10 dollars spread your account balance will get to below $1,000 dollars and the needed margin requirement percent% is 100% i.e. $1,000, henceforth your open trade positions will immediately get liquidated using a Margin Call once your trading margin requirement falls below 100 percentage.

Most brokers do not set 100% margin requirement, but there are those brokers that set 100% margin are not suitable for you at all, even those who set 50 % margin requirement are still not suitable. Choose those set 20 percent% margin requirements, in fact, those brokers that set their margin requirement at 20 % Margin Requirement are among some of the best because the likely hood that they close-out your trade position using a Margin Call is reduced and minimized as displayed and shown in the above example illustration.

To Read More about Leverage & Margin - Study the Learn Lessons Below:

Leverage & Margin Explained

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