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What Is Forex Margin Call, And How To Avoid Margin Call In Forex Trading?
- Thread starter somrat4030
- Start date
Polakandil
Well-known member
Maybe all traders, who joined in trading have been getting experience to margin call account, but then is how the trader get a lesson from margin call, sometimes margin call occurs because start from own mistake and not because external factor, the mistake can be greedy, over trading, trading without risk management, etc. If the mistake from own selves, traders need to overcome them using their minds not emotions.
A margin call occurs when the account requires additional cash, i.e. you have exhausted your margin. When a margin call occurs, a trader's positions are liquidated or closed out.
Using leverage effectively is a wonderful method to prevent margin calls. The idea is that the more leverage employed in relation to the amount deposited, the less useful margin a trader has to absorb any losses.
Using leverage effectively is a wonderful method to prevent margin calls. The idea is that the more leverage employed in relation to the amount deposited, the less useful margin a trader has to absorb any losses.
In simple words, a ‘margin call’ means when the account needs more capital.
In order to trade through your live forex account, you must have a significant amount of capital in your account to begin with, this is called the ‘margin’ of your account. The Margin call occurs when trading losses lower the usable margin below an acceptable threshold specified by the broker. Thus margin call is the indication to fill in capital above your margin level so that you can continue trading.
In order to trade through your live forex account, you must have a significant amount of capital in your account to begin with, this is called the ‘margin’ of your account. The Margin call occurs when trading losses lower the usable margin below an acceptable threshold specified by the broker. Thus margin call is the indication to fill in capital above your margin level so that you can continue trading.
Tumultuous
Member
Margin calls are important in a trade to avoid draining the whole trading account. Traders must add funds to keep the trade open or close his trading position in order to avoid excessive losses.
I think risk management is very important when you are trading with leverage. A poor risk management plan often results in a margin call situation when you lose leveraged trades. You should be able to cut your losses early and only use optimal leverage in the first place.
Aficionado
Member
Thankfully, we have margin calls in forex that alert us when we need to add more money to our trading account. But, getting margin calls is not good for trading, as it means your strategies aren’t working the way you have wanted them to.
Polakandil
Well-known member
No anyone traders want to get a margin call account, there is so many reasons why traders face a margin call, mainly because the free margin is below the margin call level, the broker will automatically close order one by one until the free margin is above the margin call level. For more reason, the cause of margin calls is trading high risk using big lot size and over-trading.
PriceNTime
Active member
Important thread for newcomers to read and understand. So many automatically say that high leverage is risky. I say that misuse of high leverage is risky. Once you understand margin and ensure you use it wisely, higher leverage can be a very powerful tool for you.
Polakandil
Well-known member
Leverage is associated with risk, although possible to boost high profit using high leverage but too risky. However, if a trader can control their trades, high leverage is not big deal, high leverage allows traders to use a bigger position size and it will quickly reduce the free margin and when the margin call level is achieved automatically broker closed orders one by one until the margin level above margin call level threshold.
Thaumatology
Member
Traders who use leverage need to meet the margin requirement set by their broker. And they get a margin call notification from the broker when their capital amount falls below the margin requirement in case of a loss. This situation should be avoided at all costs by managing the risk effectively and putting stop losses in every trade.
finance girk
Active member
A margin call is a warning from your broker that your stop loss will soon be approached. If you can't put in more money in your account, you must close the losing trades. Do not over leverage your trading account or you can keep a healthy amount of free margin on the account. Best Free Forex Signals Online
BinarySumo
Active member
To avoid a margin call, traders should monitor their account balance and use stop-loss orders to limit potential losses. Proper risk management is crucial to avoid a margin call.
Polakandil
Well-known member
All traders maybe in the trading career ever facing margin call account, however margin call should give lesson for traders, here risk management is very important to keep safe trading and low risk.
BattMaclaren
Member
Thanks! You explained margin call and leverage in forex trading very clearly. One tip for avoiding margin call is to always use stop loss orders to limit potential losses. It's also important to always be aware of your account's margin level and make sure to keep enough funds to meet the margin requirements. Another way to avoid margin call is to trade with lower leverage and maintain a proper risk management strategy. Overall, it's important to have a good understanding of these concepts and always be mindful of your trades to avoid any unwanted margin calls. I use one step evaluation prop firm strategy to avoid such issues
Last edited:
GeekyForex
Well-known member
Let's look at an example of using margin with the following criteria:
Initial Deposit: £10,000
Currency Rate: 1.125
Margin: 2%
Trade: 4 x £100,000 EUR/USD
Using the above trading criteria the margin requirement is calculated as £400,000 x 1.125 x 2% = £9,000.
On the basis of the above it may initially seem that this is a sensible level of trade. There remains a £1,000 useable margin which equates to 10% of capital, however, the broker may require a minimum useable margin of 5% of capital i.e. £500. On this basis, with a pip value of £40, there is only room for a 12.5pip movement against the trade before the minimum margin requirements are met and a margin call triggered.
In the above example we have not accounted for the brokers spread, in reality a spread cost will be incurred between 1-5 pips, reducing the allowance of 12.5 pips further.
Initial Deposit: £10,000
Currency Rate: 1.125
Margin: 2%
Trade: 4 x £100,000 EUR/USD
Using the above trading criteria the margin requirement is calculated as £400,000 x 1.125 x 2% = £9,000.
On the basis of the above it may initially seem that this is a sensible level of trade. There remains a £1,000 useable margin which equates to 10% of capital, however, the broker may require a minimum useable margin of 5% of capital i.e. £500. On this basis, with a pip value of £40, there is only room for a 12.5pip movement against the trade before the minimum margin requirements are met and a margin call triggered.
In the above example we have not accounted for the brokers spread, in reality a spread cost will be incurred between 1-5 pips, reducing the allowance of 12.5 pips further.
nhulan95
Member
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