What Is a Margin Call

As you know, forex is a speculative activity, through which you can either win or lose money. When the market moves against your position, there is a risk that the capital in your account will fall below margin requirements. In this case, the broker will issue a margin call for you to add funds. If you fail to do so, your position(s) will be closed to prevent further losses. A margin call thus prevents you from having a negative balance in your account. Example :A trader opens a $10,000 trading account. He then opens one lot of the GBP/USD with a margin requirement of $1,000 (used margin). This means that he now has a $9,000 usable margin. The used margin refers to the capital available for potential losses or for the purchase of new positions.In the event that the market moves against your position and that your losses exceed the $9,000 of your usable margin, if you do not add funds upon receiving a margin call, your position will be closed. By closing your position, your broker limits both his and your risk. The consequence is that when trading forex online, you will never lose more than what you’ve deposited in your account.