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Margin Call

Discussion in 'Traders Glossary' started by Pharaoh, May 7, 2010.

  1. Pharaoh

    Pharaoh Colonel

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    Hello, this is Mr. Margin calling about your account balance. :p

    Short version:
    You don't have enough money left in your account, so the forex broker automatically closes some or all of your positions.

    Long version:
    When using leveraged investments, one often trades more money than is in the account. Originally, a margin call was a phone call from a broker notifying a trader that more money needed to be deposited when price moved too far against a trader's position and the equity in the account became too small to sustain the minimum margin requirements to maintain open positions.

    Most forex brokers don't place this sort of phone call. When a forex account has too little equity to keep all the trades open, the broker usually automatically closes some or all of the open trades in the account.

    Both the account leverage and the minimum margin requirements can affect when a margin call will happen. Read and understand your trading agreement with your broker.

    Traders who exercise proper risk management can still lose money, but will rarely need to worry about margin calls.
     

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