What Happens If a Trader’s Margin Account Falls below the Maintenance Margin?
The trader receives a margin call, which is a demand from the broker or clearing house to deposit additional funds immediately to bring the account balance back up to the initial margin level. Failure to meet the margin call will result in the broker forcibly liquidating the trader's position to cover the loss.
This is a critical risk management step.
Glossar
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.
Margin Account
Leverage ⎊ A margin account in cryptocurrency, options, and derivatives trading represents an equity-backed loan from a broker, enabling traders to control a larger position than their available capital would otherwise permit.
Maintenance Margin Call
Trigger ⎊ A maintenance margin call in cryptocurrency derivatives arises when the equity in a trading account falls below the required maintenance margin level, dictated by the exchange’s risk parameters and the notional value of open positions.
Deposit Additional Funds
Requirement ⎊ Deposit additional funds refers to the action a trader must take to increase the collateral in their margin account when a margin call is issued.