What Is a ‘Margin Call’ and When Is It Issued?
A margin call is a demand from a broker or exchange for a trader to deposit additional funds or collateral into their margin account. It is issued when the equity in the trader's account falls below the required maintenance margin level.
This drop typically occurs when the market price moves unfavorably against the trader's leveraged position, causing losses that erode the initial margin. The call must be met to avoid forced liquidation of the position.
Glossar
Forced Liquidation
Liquidation ⎊ Within cryptocurrency derivatives, options trading, and financial derivatives, liquidation represents the involuntary closure of a leveraged position due to margin deficiencies.
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.
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.
Deposit Additional Funds
Deposit ⎊ Within cryptocurrency, options trading, and financial derivatives, a deposit signifies the allocation of capital to a trading account or platform, enabling participation in various market activities.
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.
Margin Level
Metric ⎊ Margin level is a critical quantitative metric used to assess the health and risk exposure of a leveraged trading account.