Calculating a Margin Call
A Margin Call occurs when a trader’s position moves against him and the client is required to send additional funds in order to maintain the position.
The margin level is calculated by dividing the current equity in an account by the current amount of margin in use (used margin).
If your equity moves below your used margin, you will receive a margin call.
When the client’s open position reaches the 100% margin level, the client is using their entire available margin. If the position moves against the client and falls below 100%, then the client will be in margin call.
If the market continues to move against the client’s open position (i.e the client has is long EURUSD but EURUSD is moving lower) and the margin level drops to 50%, the trade will automatically be closed out.
This is to protect the client from incurring any further losses and is a risk management tool used to protect the client.
If the client has a number of positions that are moving towards the 50% close out level, the platform will automatically start to close out the trades starting with the largest position first.
RISK WARNING: Foreign exchange and derivatives trading carry a high level of risk. Before you decide to trade foreign exchange, we encourage you to consider your investment objectives, your risk tolerance and trading experience. It is possible to lose some or all of your initial investment, so do not invest money that you cannot afford to lose. Seek advice from an independent financial or tax advisor if you have any questions. The FSG and PDS are available upon request.