Does a Margin Call Only Happen in Crypto Trading?
No, a margin call is a standard risk management procedure used across all leveraged financial markets, including traditional stock, forex, and futures trading. The concept is the same: when a leveraged position loses value and the account's equity falls below the maintenance margin, the broker or clearinghouse demands additional collateral.
While the volatility of crypto can make margin calls more frequent, the mechanism itself is universal in derivatives and margin-based trading.
Glossar
Leveraged Position
Amplification ⎊ A leveraged position within cryptocurrency, options, or derivatives fundamentally alters risk-reward dynamics through the utilization of borrowed capital or contractual obligations.
Risk Management Procedure
Procedure ⎊ A Risk Management Procedure, within the context of cryptocurrency, options trading, and financial derivatives, establishes a formalized framework for identifying, assessing, and mitigating potential losses.
Margin Call
Trigger ⎊ A margin call in cryptocurrency, options, and derivatives markets represents a broker’s demand for additional funds to bring an account back to the minimum required margin.
Futures Trading
Leverage ⎊ Futures trading, within cryptocurrency and broader financial derivatives, represents an agreement to buy or sell an asset at a predetermined price on a specified future date, functioning as a contingent claim whose value is derived from the underlying asset’s price movements.