What exactly is a Margin Call ?
If the money in your account falls below the required margin call (usable margin), your broker will close some or all positions open it. This prevents your account falls into a negative balance, even in a highly volatile market and move quickly.
Margin Call can be seen easily also through Margin Level. If you fall in margin levels close to 100% or less then you open positions can closed automatically by the system broker.
Margin Level formula is = Equity / Margin x 100%
EXAMPLES OF MARGIN CALL
Example # 1
Let’s say you open a regular Forex account with $ 2,000 (not a smart idea). You open 1 lot of EUR / USD, with the margin $ 1,000. Usable Margin is the money available to open new positions or trading losses. Since you started with $ 2,000, your usable margin is $ 2,000. But when you opened 1 lot, which requires the margin $ 1,000, your usable margin is now $ 1,000.
If your losses exceed your usable margin, amounting to $ 1000, you will get a margin call.
Example # 2
Let’s say you open a regular Forex account with $ 10,000. You open 1 lot of EUR / USD, with the margin $ 1,000. remember, usable margin is the money you have available to open new positions or trading losses. Because you start with 1 lot, usable margin you have is $ 10,000. Once you open a trade, you now have $ 9,000 $ 1,000 usable margin and used margin.
If your losses exceed your usable margin, amounting to $ 9,000, you will get a margin call.