You need to understand the concept of margin.
If you do not know what to do when faced with a margin call from your broker, you will definitely experience the shock of your trading account blowing up.
Here are five ways to avoid a margin call. Today we will explore the first.
1. Know what a margin call is.
Understanding what a margin call is and how it works is the first step in knowing how to avoid one.
Most new traders want to focus on other details of trading such as technical indicators or chart patterns.
You must give thought to the other important elements.
These include margin requirements, equity, used margin, free margin, and margin levels.
If you’re hit with a margin call out of the blue, this usually means you have no clue what causes a margin call.
Generally, that means you are opening trades without considering margin requirements.
If you do this, you are doomed to fail as a trader. Guaranteed.
A margin call occurs when your account’s Margin Level has fallen below the required minimum level.
At this point, your broker will notify you and demand that you deposit more money in your account to meet the minimum margin requirements.
Nowadays, this process is automated.
So your broker will probably notify you by email or text rather than receiving an actual phone call.