Risk Management
Margin Call
"The margin call is your broker's ultimatum: replenish your account or your positions will be liquidated."
In-Depth Definition
A margin call occurs when a margin trading account falls below the maintenance margin level. The maintenance margin is the minimum amount of equity you must maintain in your account to keep your positions open. If the value of your positions decreases and your account falls below this threshold, the broker issues a margin call. This is a notification asking you to deposit additional funds or close some of your positions to bring your margin back to the required level.
The primary purpose of a margin call is to protect the broker from potential losses if the trader is unable to meet their financial obligations. Ignoring a margin call may result in the automatic liquidation of your positions by the broker, without your prior consent, in order to recover the funds owed. Liquidation is usually done at market prices, which can be very unfavorable if volatility is high. It is crucial to carefully monitor your margin level and understand the terms of your margin account to avoid margin calls.
StarQuant Insight
StarQuant can anticipate potential margin calls by analyzing in real time the volatility of the assets held and projecting stress scenarios on the portfolio. The AI alerts traders to critical margin levels and proposes automatic hedging strategies to reduce the risk of forced liquidation.
Pro Tip
Never use the maximum margin available! Always keep a comfortable safety margin to absorb unexpected market fluctuations. Set strict stop losses to limit your potential losses and carefully monitor your margin ratio.