By James McKee
Ah the dreaded margin call, in this article I will be discussing the topic in-depth to give traders a better understanding of when and where the line in the sand is truly drawn. Before recent US policy changed the standard “lot” purchased in the forex market was for $100,000.00, which has changed to $50,000.00 recently. A margin call is the point at which a trade loses to the point that your money is nearly lost and the losses are about to cut into the leverage put up for you by your broker. Having solid stop loss and take profit figures will help to ensure that the margin call does not come about with you completely unaware.
A margin call might seem like a horrible thing but without it you would end up owing your broker thousands of dollars beyond your investment. Such a prospect is indeed a very scary thing and so a margin call when cast in that light is not such a bad thing. By utilizing pivot points and proper SL/TP guidelines you can guard against the dreaded margin call as much as possible. The other lesson here is to stay in touch with your broker and always keep your phone handy.
This is one of the aspects of the Forex currency exchange business that is a fact of life, love it or hate it a margin call exists for a reason. We all have to make money, and so do our brokers. We must all bear in mind that we are responsible for our own decisions, our own trades, and the resulting profit or loss that may occur. Many brokers will offer advice with regard to trades and they do mean well, but ultimately only you can truly make the decision, so when that phone does ring do not be caught off guard! Happy trading!
About the Author
Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.
