What Is the Impact of High Leverage on the Frequency of Margin Calls?
High leverage significantly increases the frequency of margin calls. Leverage magnifies both gains and losses.
A small adverse price movement, which would be negligible for an unleveraged position, can quickly deplete the small amount of capital (margin) put down for a highly leveraged position. This rapidly brings the account equity below the maintenance margin, triggering a margin call much sooner.
