Question: What is a Margin Call?
Answer: A margin call happens when a trading account no longer has enough money to support the open trades. This happens when there are too many floating losses.
For example, if you are using 200:1 leverage and you have a $20 account and use $10 to open a trade, your trade size on the market would be $2000. Each pip would be worth around 20 cents. If the market moved against you by 50 pips that would be floating loss of $10. Since it takes $10 to keep your trade open, at a floating loss of $10.01, you will no longer have enough margin to keep your trade open. At that point your broker will automatically close your trade because you no longer have enough margin to keep that $2000 trade on the market. This is how a margin call works.
For example, if you are using 200:1 leverage and you have a $20 account and use $10 to open a trade, your trade size on the market would be $2000. Each pip would be worth around 20 cents. If the market moved against you by 50 pips that would be floating loss of $10. Since it takes $10 to keep your trade open, at a floating loss of $10.01, you will no longer have enough margin to keep your trade open. At that point your broker will automatically close your trade because you no longer have enough margin to keep that $2000 trade on the market. This is how a margin call works.
