1. Money

How to Deal with a Margin Call

Dealing with a Margin Call

By

Getting a margin call is no joke. It's a frustrating and unexpected experience. As serious as a margin call is, it doesn't have to be the end of your trading career. A major reset, yes, but not an end.

Keep Your Cool
The first thing to remember is to keep yourself together. Don't do anything impulsive like empty your account right away, or start revenge trading. Before you can even make any decisions you need to get a clear head and figure out what really happened to you.

Assess Your Mistakes
As much as we hate to admit that we are capable of mistakes, trading mistakes happen all the time. The best thing we can do is face it when we have made a mistake and take a careful approach to recovering from them.

After your margin call, you should sit down and figure out what your major mistakes were leading up to the event. Did you over trade, use too much leverage, or fight the trend? Maybe you neglected to set stop losses, or maybe it was a combination of things. Whatever the mistakes, you need to figure out exactly where you went wrong so you can avoid it when you get yourself back together and being trading again.

Start a Trading Log
One step you can take to help yourself in the future is to create a trading log. It can be a professional trading log on a spreadsheet, or just something you scribble onto a piece of paper. The main idea is to track every trade you make and declare a reason for the trade as you make it. At the end of the month, you can review your trading decisions and see if you are trading with clarity and direction. If you find mistakes, you can be more conscious of them for the next trading month.

Write Yourself a Reminder
It may be difficult to do, but write yourself a reminder of why you ended up with a margin call. If it happened because you were over trading, you could write something like "Over trading leads to a Margin Call". Scribble it down on a post it and put it on your trading monitor to remind you every time you are placing a trade. It might seem silly, but these are tried and true techniques to help you succeed.

Remember, you're in good company. Professional traders have margin calls occasionally. Sometimes it's serious and sometimes it's not that serious. The main thing is that you go through the process of figuring out what went wrong and use that as a tool to rebuild yourself using more discipline. We are only human and feeling like a failure is a very emotional experience. Margin calls are not failures, they are learning experiences and they should be viewed as such.

  1. About.com
  2. Money
  3. Forex Trading
  4. Trading Psychology
  5. How to Deal with a Margin Call - Dealing with a Margin Call

©2014 About.com. All rights reserved.