Margin call happens when the remaining balance on the trader’s account isn’t sufficient to cover the current “paper loss” on the open positions. In Forex trading margin call is a particularly bad problem because everything is happening on-line (i.e. very fast), Forex brokers don’t like to see a negative balance (that’s their loss actually) and a high leverage can cause margin calls very often. So, when the remaining free margin in the account balance isn’t enough to cover the current loss on all trader’s position and a margin call appears, all positions are usually automatically closed out. Or only all positions with a loss are closed out, while the profitable ones remain open, that depends on a specific broker’s conditions. Forex brokers also prefer to set the margin call level to about 10%, which means that if your free margin falls below 10% of the loss on the open positions you’ll get a margin call. Brokers try to secure themselves from losses during the fast market moves, preventing trader’s balance from going below zero.
I’ve experienced margin call quite a few times during my early attempts to master a Forex trading. But during last few years I haven’t received a single margin call because I always use stop-loss levels. And what about you?
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