Explain the Concept of “Margin-to-Equity Ratio.”
The margin-to-equity ratio is the total margin used in a trading account divided by the total equity (value) of the account. It is a key metric for assessing the risk level of a trader's leveraged positions.
A high ratio indicates that a large portion of the account's value is tied up as margin, meaning the trader is highly leveraged and closer to a margin call. A low ratio suggests lower leverage and a larger capital buffer.
