Definition: A margin call is a demand from a broker to a trader to deposit additional funds or securities into their margin account to bring the account balance up to the required maintenance margin level. This occurs when the account equity falls below the broker’s required margin level due to adverse price movements in the trader’s positions.
Understanding and managing margin calls is crucial for successful leveraged trading. Traders must regularly monitor their account equity and market conditions to avoid margin calls, which can lead to forced liquidations and significant losses. By maintaining sufficient margin levels and implementing effective risk management strategies, traders can ensure financial stability and minimize the risk of margin calls disrupting their trading activities.
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