Avoiding Margin Calls.

Let’s continue our discussion with the second technique for avoiding margin calls.

2. Know what the margin requirements are even before you place ANY order.

Know the margin requirements BEFORE you open a trade.  This is crucial.

Margin calls are not thought about much by most traders.

This is especially true when placing a pending order.

Typically, a trader will tend to place an order with their broker.

And it remains open until the limit price is reached or until the pending order expires.

When you place a pending order, your trading account is not affected.

This is because the margin is not applied to pending orders.

However, the pending order exposes you to the risk of the pending order being automatically filled.

If you’re not properly monitoring your margin level, when this order gets filled, it could result in a margin call.

To avoid this situation, consider margin requirements before placing an order.

Account for the margin amount that will be deducted from your free margin.

In addition, have some additional margin, so your trade will have some breathing room.

When you have multiple pending orders open, it can get quite confusing.

And if you’re not careful, these orders could result in a margin call.

To avoid such a tragedy, it’s crucial that you understand the margin requirements for each position you plan to enter.

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