What happens if you fall below margin?

What happens if you fall below margin?

Let's say that your account balance falls below $1,000. Your broker can no longer match you

with $100,000, and this means you have

open position on the market IS $100,000.

Neither you nor your broker will benefit from your account balance going negative, but it will

do so if you don't have enough usable margins to hold your position.

Should you fall below margin, there are only 2 options:

1) You deposit more money into your account, or...

2) Your broker is forced to issue a

no usable margin, as the minimum to hold onemargin call.

When your broker issues a margin call, he will close all of your open positions - in other

words - he will cancel pending 'buys' and complete pending 'sales' to minimize loss, and

insure that you do not lose your opening deposit.

Policies on margin calls vary from broker to broker, and you should familiarize yourself with

your broker's policies prior to opening an account.

Some brokers will describe their policies in terms of

use

leverage ratio, while others prefer tomargin percentage.

These requirements can be expressed mathematically as:

Leverage = 100/Margin Percent

or

Margin Percent = 100/Leverage

Also, keep in mind that Forex trades for only 5 days out of the week. If you open a new

position on Friday and hold it over the weekend, you may be subject to a higher margin

percent than you would be during the work week.

The best approach is to know your broker's policies inside and out before you get involved,

and determine what level of risk
you are comfortable with taking.

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