Do you have any idea about forex margin call? No! Well, you will be surprised to know that trading in the forex market without knowing margin call is the starting of failure. However, you are lucky in this respect as you landed up at the right place where you will get proper information about margin call and how it affects your trading business.
What is a margin call in forex?
Margin call takes place when your broker notifies that your deposit amount has fallen below the minimum required level. This position is also referred to as partially closed or liquidated. You will not receive a margin call unless and until your position is liquidated or closed which means all your trades will return and the balance left in your account can no longer be used to open a new position.
Still confused? Not getting the points properly? Let’s cite an example here for proper understanding. Suppose you have opened a forex account of worth $500 and you have opened three mini lots with the marginal requirement of $100. These three mini lots will be called as used margins. Since you have opened your account with $500 and opened three mini lots, this requires a minimum marginal requirement of $300 in your account. If you face loss and your marginal amount drops below $200, you will receive a margin call.
How forex margin call affects trading business?
People who are planning to enter into the forex trading business often face the question “what is margin call in forex trading? How does it affect business? The change in forex market can be traced if you observe cautiously the frequent price fluctuation. The key aspect of forex business is to manage your forex margin efficiently. Different money management strategies and technical analysis can help you in managing your forex account. Moreover, abstain from committing frequent mistakes can keep you away from getting Forex margin call.
However, unless you know exactly when your account runs into margin call, you will not be successful to manage it efficiently and thereby may face serious losses in trading business.
What are the frequent mistakes done by traders?
- Overconfident to predict future market trends
There are some beginners who become overconfident after winning two or more trades. They believe the sooner they enter into a trade, the quicker they earn more pips. Instead of following marketing trends, they start predicting market value of their own trade. This gives them nothing but the fatal result.
There are some traders who would like to trade with too many currencies at the same time. They instead of using trading strategies try to invest in many currencies that bring them the trouble of marginal call. They also lose their focus on a single currency. Due to their irresponsible behavior, these traders most often face margin calls.
- Trailing stop-loss
Stop loss plays an important role while considering trading. Most of the big and experienced traders use the stop loss option to minimize losses. But the trading system will not allow you to use this option on more than 15 pips, especially during the fluctuating market. Still, it is suggested that beginners should use this stop loss option to diminish the percentage of losses.
Therefore, whenever, you observe that the forex market is moving against the position you have opened, close your present trade or position and take firm decisions based on the current situation of the market. Stop predicting future trends like this as it will bring nothing except losses. Once you learn to manage your account efficiently, you can certainly avoid forex margin call.