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How to avoid margin call?
Source: | Author:finance-102 | Date2022-12-31 | 436 Views | Share:
A margin call occurs when the floating losses in your trading account exceed the used margin, meaning that your equity has decreased and is now below the used margin. When this happens, your broker will issue an alert and may take action to liquidate some of your positions. The margin call level, on the other hand, is the point at which you are in danger of experiencing a margin call. The typical value for the margin call level is around 80%, but it can vary depending on market conditions.

A margin call occurs when the floating losses in your trading account exceed the used margin, meaning that your equity has decreased and is now below the used margin. When this happens, your broker will issue an alert and may take action to liquidate some of your positions. The margin call level, on the other hand, is the point at which you are in danger of experiencing a margin call. The typical value for the margin call level is around 80%, but it can vary depending on market conditions.

 

There are several ways to avoid a margin call in forex trading:

 

Understand margin maintenance requirements: Each financial security has its own margin requirements, so it is important to know what they are before you start trading. This information should be available on your broker's website.

 

Use stop orders: Placing stop orders can help you limit your losses and maintain the margin in your account. However, keep in mind that if the market moves quickly against you, you may still experience a margin call.

 

Ask your broker about margin requirements: If you are unsure about the margin requirements for a particular currency pair, ask your broker for more information. They will be able to provide you with the necessary details.

 

Be aware of the risks associated with margin trading: Margin trading allows you to trade with more capital than you have available, but it also carries higher risks. Be mindful of these risks and try to minimize them whenever possible.

 

Diversify your portfolio: Having a well-diversified portfolio can help reduce the risk of experiencing significant losses, which could trigger a margin call. Spread your investments across a range of different assets to reduce your risk.

 

Use a stop-loss order: A stop-loss order is an instruction to your broker to close a trade if it reaches a certain price. By using a stop-loss order, you can limit your potential losses and avoid a margin call.

 

Keep an eye on your account balance: Regularly check your account balance and be aware of how much margin you have available. If your equity falls below the used margin, you may be at risk of a margin call.

 

Use a trailing stop: A trailing stop is a stop-loss order that adjusts to the market as it moves in your favor. By using a trailing stop, you can lock in profits and minimize the risk of a margin call.


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