Forex Blog

First-hand Forex trading experience and information about foreign exchange market that will be useful to traders

Archives

Have You Ever Experienced Margin Call?

August 10, 2009 by Andriy Moraru

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?

Have you ever experienced a margin call?

View Results

Loading ... Loading ...

If you want to share your thoughts on how to avoid margin calls in Forex trading, please, feel free to reply using the form below.

Leave a Reply

required
required (will not be published)
optional