Considering everything which comes into the picture, one of the most vital things which you have to keep an eye out for is making the right calls while trading. Think of it this way; there’s nothing better than making sure that there’s going to profit from this market. And you can get it done if you make the right calls. One of the most game-changing calls which you’ll need to make is margin calls. As for what is margin call level in Forex, here’s a proper explanation right from the beginning of things.
Margins and Margin calls:
It’s not like you can just trade in foreign exchange straight from a bank account. You need a proper trading account to partake in investment activities. Here’s an insight though, your trading account is simply where you keep your money which will go onto the market as per the orders you make, which too will relay through to the brokers as through that same account.
To hit the point of it all, what happens when you end short of the investments you need to execute a certain transaction? Obviously, you can’t, and your broker will ask you to induce more investments into the account. This is as simple an explanation of a margin call as you’ll find.
However, when it comes to an understanding the basics behind determining a Forex margin call level, well, there are quite a few things which come into the picture.
Think of it this way. Every single trading account comes with a risk management setup so that you don’t end up losing out on too much money in one go. So, if you’re investing $100 with leverage 1:50, your effective live investment will turn out to be $5000.
Now to continue, if the trade you’re going into has a probable profit percentage of 2%, you’re looking at a probable profit of more $100. With risk management, you can participate in this transaction as it you’re not in a position to lose more than your investment amount.
Delving further Into Margin Calls:
Although there are numerous formats of risk management setups around, those basing on overall ROI are common. To come to the previous pointer and to answer the question of what is margin call level in Forex, this is it, Period. This is what makes a call on your trading margins about.
The fact that this is still your call is because you have the option to override risk management setups for your trade. Coming back to the previous pointer, if you think you can actualize the profits just from a high risk/reward transaction, then you can make that call.
Calling on your margin is to extend your investments so that you can partake in a transaction. To exemplify with the previous transaction, you’ll need to put in $50 more in your trading account if the risk setup in your account required a minimum 1% margin of the probable profits.
So, here’s hoping that this answers your question as to what is margin call level in Forex. Trading in this market is not easy, but it’s quite profitable.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.