How Does a ‘Margin Call’ Differ from an Automatic Liquidation in Leveraged Trading?
A margin call is a notification from a broker or exchange that the trader's margin balance has fallen below the required maintenance margin level. It is a warning, giving the trader a chance to deposit additional funds to bring the margin back up to the initial margin level.
Automatic liquidation, conversely, is the forced, immediate closure of the position by the exchange when the margin level hits the critical liquidation price, often resulting in the total loss of the initial margin. Liquidation happens when the margin call is not met and the price continues to move unfavorably.
