Istilah-Margin-Call-Dalam-Dunia-Trading-Forex-300x199Margin Calls

A broker/market maker requires the trader to maintain certain level of “Equity” in his account to cover his open positions. If this level falls too low the trader will enter a “Margin call” situation. Different brokers will have different % values for their margin call policies.

  1. Customer should receive an automatic margin call notification when trading if the Equity should, at any time, equal or fall below 100% of the Used Margin.
  2. If the Equity should, at any time, equal or fall below 20% of the Used Margin for Customer’s Account in the aggregate, the broker will liquidate any part of or all Open Positions in a Customer’s Account. Closure of positions will be done on the basis of best execution prices available to the broker at that time.
  3. Customers are responsible for placing their own Stop Loss Orders to minimize losses.
  4. In addition, the broker may, from time to time and at our best effort, contact Customer and request that Customer deposit additional Collateral to secure Customer’s obligations to the broker.

 

  • Notification – equity level is low.
  • Automatic Closure of all trades – equity level is too low.
  • Equity, Used Margin and Equity Level.
  • Notification at Equity Level 100%.
  • No new trades can be opened at this level.
  • Occurs after MC Notification.
  • Equity levels at 20%.
  • ALL trades are closed, also profitable trades.
  • If enough equity remains, client may open new positions.

The Investor has a number of options when they receive a “margin call”

  1. Do nothing, this way the investor is either (a) confident the market will return in his favour or (b) has no further funds to invest.
  2. Extend “stop losses” (if applicable) if there is sufficient funds in the account balance.
  3. Close out some positions to free up capital to allocate to the M/C.
  4. Add additional funds to the account and the investment to move the S/L further from the market position.

 

Calculating Equity levels

Equity level % = Equity/used margin x 100

  • Example: ($500/$100) * 100 = 500%
  • Example: ($100/$500) * 100 = 20%

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Example

A Customer has equity of $5,000 and an open position of 300,000 EUR/USD.

For such a position, the margin requirements would be $1,500 which stands for Used Margin as well. If the equity of the customer’s account falls to $1,500, the Customer would get a Margin Call Notification only. At this point the trader has a number of options we mentioned above.

If  none of these options are auctioned and the equity continued dropping to reach $300 then the 300,000 EUR/USD position will be closed at market rate.

Example

Client X has $1000 Balance and Equity.

X opens a trade of 50k EURUSD. Required Used Margin: $250.

Current Equity Level 400%. ($1000/$250 * 100).

Trade goes badly: Equity drops to $250.  Equity Level 100%. ($250/$250 * 100).

Margin Call Notification sent = 100%

Trade gets even worse: Equity drops to $50.  Equity Level 20%. ($50/$250 * 100).

Margin Call: Automatic Closure of ALL positions, regardless of PROFIT/LOSS