# Margin call

A margin call is the action taken by the broker to close your trade when the amount of money in your account can no longer take any losses you may incur. If your equity drops below your initial margin, the broker will close several or even all of your open positions. They will close at least as many positions as is necessary to eliminate any risk of the account balance dropping below the minimum margin requirement.

Margin calls therefore eliminate the possibility of a trader owing more than they can afford to pay back on losing trades.

For example, let’s assume your account balance is \$1,200 and your account is leveraged 100:1. If you open a position with a standard lot of EUR/USD, you are required to have an initial margin of \$1,000.

In this case, every time the EUR drops by one pip against the USD, you will incur a loss of \$10. If the EUR/USD then drops 20 pips, your loss would be \$200.

At this time you still have enough money in your original account, as \$1,200 - \$200 = \$1,000. However, if the EUR/USD falls by 1 more pip, you will drop below the margin requirements and your EUR/USD position will automatically be closed.

This closing of the open position is the margin call.

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### What's next?

• i can't understand why: "...At this time you still have enough money in your original account, as \$1,200 - \$200 = \$1,000. However, if the EUR/USD falls by 1 more pip, you will drop below the margin requirements and your EUR/USD position will automatically be closed...." I still have \$1000 - \$10 = \$990 ???
• Correct if i am wrong.

The position is close because you only have on this exemple a leverage of 100:1 this means,

100*1200\$= 120.000.00\$
In this exemple you have open a positon of 1LOT (100.000.00\$)

100*990=99.000.00\$ so you can't cover the 1 lot size (100.000.00\$)Margin Call
• It means that if I open account 1:100 leverage with 1000 \$ I can't trade ? because if I lost 1 pip I'm out? smile
• no, because you have open a position of 1LOT (100.000.00) the correct with a money managament is risk only 2% of your accout size. so with 1200\$ you can risk 24\$ if you want a stop loss with 20 pips or 30 pips for exemple the position size should be, of 0.08 pips +-
• 0.08 lots that is wink
• hindsighthero i' am correct? with the explenation?
• Yes, Freelancer, sounds right.

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