Knowledgebase: Forex terms
"Margin Call" VS "Stop Out level"
Posted by Homi .M on 07 October 2014 03:49 PM

Margin Call:

A margin call happens when your brokerage informs you that the balance of your trading account has dropped below the required margin(%), and there is not enough equity (floating profit- floating losses or unused balance) to support your open orders any further. 

In another way margin call is a broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Margin calls occur when your account value depresses to a value calculated by the broker's particular formula.

How it works:

Fxglory margin call is 50% and stop-out level is 30%

It means that when a client account equity becomes equal to 50% of the required margin, you will get a warning either a highlight on your platform, or a certain message, or an email. It warns you that your equity is now insufficient to continue trading and maintaining currently active positions, and that means that you have to either think about closing some of them or add more funds to the account to meet the minimum margin requirements.

If you don't do so, you'll be approaching the Stop out level at which the system (MT4) will perform an automated closure of your unprofitable trades, starting from the least profitable and until the minimum margin requirements are met.

 

Stop Out level:

It is a level at which all traders' orders will be closed due to the critically low equity level to prevent further balance drown down. Stop out will be executed at the current market price of opened orders when the margin level is lower than the Stop out level.


To sum up

When we say that Margin Call is 50% and Stop Out level is 30%, it means that once your account equity = required margin x 50%, you'll get a margin call in the form of a warning.

And when your account equity = required margin x 30%, your trades will be closed automatically, starting from the least profitable one.

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