What is Margin Call? Forex Margin Call Explained
To be successful in Forex trading, you must understand the term called margin call. In this article, we’ll learn about margin call in forex.
What is margin call in Forex?
Margin is the amount of money in your trading account you need to keep your positions open and cover any losses.
A margin call is an alert which notifies you when you need to deposit more balance on your trading account to keep a position open. If the funds in your account are below the margin requirement, you’ll be in the margin call.
You need to add more funds to your account or close positions to maintain your account’s margin requirement.
Let’s say a trader starts to lose money. So the funds on his account may not be enough to keep other trades open. In that case, your broker will notify you to add funds to bring your balance up to the minimum margin – this is margin call. When you add balance, you can continue to trade.
5 ways to avoid margin call in forex trading
You’ll almost certainly lose money if your account triggers a Margin Call. It is because your positions will be closed regardless of whether they are profitable or not. Receiving a Margin Call in the first place indicates that the majority of your trades are in the red.
To avoid margin call:
- Always follow an effective risk management strategy
- Do not risk more than 2%
- Do not over leverage
- Do not over trade
- Trade smaller sizes