How to Make a Margin Call

How to Make a Margin Call
A margin call will be issued as soon as your Equity equals or falls below your Used Margin.

　　Assume you're a successful former British spy who now works as a currency trader. You deposit $10,000 into a small account.

　　The $10,000 will show in the “Equity” column of your “Account Information” box when you first log in.

　　Useful Margin

　　You'll also see that the “Used Margin” is $0.00 and the “Usable Margin” is $10,000, as shown in the diagram below:

　　“Equity” minus “Used Margin” will always equal your Usable Margin.

　　Equity – Used Margin = Usable Margin

　　As a result, Usable Margin is calculated using Equity rather than Balance. If and when a Margin Call occurs, it will be determined by your equity.

　　There will be no Margin Call as long as your Equity exceeds your Used Margin.

　　NO MARGIN CALL (Equity > Used Margin)

　　A margin call will be issued as soon as your Equity equals or falls below your Used Margin.

　　MARGIN CALL (Equity = Used Margin) = RETURN TO DEMO TRADING!

　　Let's pretend your margin need is 1%. You purchase one lot of EUR/USD.

　　The worth of your equity stays at $10,000.

　　Because the margin wanted on a small account is $100 per lot, the used margin is now $100. The Usable Margin has increased to $9,900.

　　Your Used Margin would be $0.00 and your Usable Margin would be $10,000 if you closed out that 1 lot of EUR/USD (by selling it back) at the same price at which you got it. The value of your equity would stay at $10,000.

　　Instead of closing the 1 lot, you (the adrenaline junkie, chop-socky guy that you are) became overconfident and bought 79 more lots of EUR/USD for a total of 80 lots because that's how you roll.

　　Your Equity will stay unchanged, but your Used Margin will be $8,000 (80 lots at $100 margin per lot). And, as shown below, your Usable Margin will now be $2,000:

　　If EUR/USD rises, you will make an outrageously large profit if you take this insanely risky strategy. This example, though, does not end with a fairy tale.

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