Are you new to FX trading and don’t know about many of its terms and today wants to know about margin call in forex? If yes, you merely have to read this comprehensive article thoroughly to understand margin call in forex better.
Many traders who know about margin are always about how they will get rid of a margin call in forex. Because they know that how much dangerous a margin call can be.
So, here is a complete article about margin call in forex:
A Definition of Margin Call in Forex
The margin call is from your broker when he informs you that your margin level has reduced underneath the compulsory minimum level. Due to margin call, that minimum level is also known as margin call level. In simple words, if you receive a margin call from your broker, then you are at a loss. Got it? If not, read till the end.
Margin Call and Leverage
Leverage is another commonly used term in FX trading. So, to understand deeply about margin calls in forex, you must have solid and complete knowledge about leverage. This is because leverage and margin call are so much related to each other. Margin and leverage are like passengers of the same boat.
Margin is the minimum amount of money needed to position a leveraged trade. At the same time, leverage provides traders with higher liability to markets without holding to fund the full amount of the trade. It’s substantial to remember trading with leverage involves threat and has the potential to deliver tidy earnings as well as tidy losses.
What Jesse Livermore says About Margin Call in Forex?
Jesse Livermore is one of the best stock traders in the history of America who was born in the 19th century. If you are an intermediate and expert FX or stock trader, then you must have heard about Jesse Livermore. Because he was and still famous for his strategies. Jesse Livermore once said:
“Never meet a margin call. You are on the wrong side of the market. Why send good money after bad? Keep the money for another day.”
Almost a century ago, Jesse pointed towards the problem that people are facing nowadays regarding margin calls. He also gave a solution: to stay away from margin call in forex by keeping extra money for the next day.
Causes of Receiving a Margin Call in Forex
There are many reasons behind receiving a margin call in forex, but we have compiled a few of those that are the most common for you:
- Depletion of usable margin due to sticking to non-profitable trades for a long time.
- Sticking to non-profitable trade with a huge amount of leverage for a long time.
- Non-stop trading without any brake when your price is not moving in your way.
If you are a beginner, then just keep in mind that you have to keep yourself away from margin call in forex. Other complicated things will get easier for you with experience.