What is Forex Margin Call?

Forex Margin Call

Forex Margin Call

Forex Margin Call, the term Margin Call comes from Stock Market. It is essentially a phone call from the Stock broker asking you to put more funds in your account to sustain the losses from open positions. At this stage trader is required to put more money in the account usually with in 24hrs or else the position would be closed at a loss. This loss can very well exceed the total account balance and you may still need to pay Stock broker for the remaining losses. The situation is worsen when you use leverage to borrow money from the bank or stock broker.

Forex Margin Call works in a slightly different manner. First off all there is no phone call from the broker. Soon after the message all / some of your open positions will be closed to free up some of the margin that was put aside when you open the position.

The only good thing about Forex Margin Call is that you won’t lose more money than your total account balance. Most brokers would close out all your positions before you run out of balance in your account. However in some cases where price gaped after the weekend may result in loss beyond your account total balance. I would recommend to check with your broker to find out about their policies regarding Forex Margin Call.

You may also want to read about Forex Leverage.

Chris Farnworth is an independent Forex and Commodity trader with many years’ experience under his belt. He travels and works from around the world trading and writing content for various websites and blogs. In his spare time he enjoys scuba diving and surfing.

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