Margin Call

In this article, which is part of the comprehensive stock market education course, we are going to answer the question, what is call margin? Call margin is a familiar concept in financial markets. This concept is not at all pleasant for traders or traders and indicates their loss.

This term is used when we have borrowed an amount from a broker or brokerage and exchange in that market, and in exchange for this amount, our money has been blocked, and in case of loss, the money will be deducted from our account. But the question is how much can we lose? This amount is different according to different markets and the place of investment. To learn more about the concept of call margin, what is a credit call? Be with us at Parsian Bors Academy.

What is margin call or credit call?

In order to know what Margin Call is and where it is used, we must understand what the word margin itself means. In fact, the margin is the money that we give as collateral for the money we borrow from the broker, brokerage or exchange.

In financial markets such as the stock market, forex, Crypto Signal, etc., when we use binance futures signals or futures transactions, the investor's margin account contains securities that were purchased with borrowed money. In fact, this account includes the investor's money and loan money, and the investor's money (in the form of collateral) is blocked in his account. Now, if the money in your account falls below a certain limit, then a margin call or credit call will happen.

What is margin call and how can we avoid it?

When one or more securities in your account reach their margin limit, you have two choices. The first choice is to add money to your account so that your account amount exceeds the margin limit. The second way is to sell one or more securities.

Call Margin occurs when the main account (the money that belongs to the user) falls below a percentage of the total money (in most cases it is considered 30%). If the investor cannot provide the desired amount, the broker will sell the securities in the person's account to provide this amount. In the following, we are going to talk more about this common term in various financial markets such as the stock market, forex, and how it occurs and how to prevent it.

What is call margin in forex and how not to call margin in forex?

In this section, we are going to talk about what the forex call is and when it occurs. This concept in FOREX is the same as the previous section, but the expression and calculations are different. In the forex market, there is a concept called Margin Level. The margin level or stop level is obtained from the net division of your capital divided by the amount of margin (the amount of money you borrowed) multiplied by a percentage.

In most forex brokers, the margin level of 100% is considered as a criterion and this limit is called Margin Call. If your holdings in forex exceed (becomes less than) the margin call, you will become a margin call. After this, the position can only be closed and a new position cannot be opened.

What is Margin in Forex and why is it so important?

So far, you have become familiar with the concept of call margin and its application in Forex, which is a part of the comprehensive Forex training course in Mashhad by Parsian Bors Academy. It should be noted that calling in Forex does not close the transaction, but if your transaction reaches the Stop Out level (50% margin level), your transaction will be automatically closed by the broker.

A simple example of what margin call, stop out and stop level are in forex

In order to understand more about what margin call is and how it occurs in Forex, pay attention to the following example:

Let's say you have $1,000 in cash and you're going to make a deal with a $500 loan. To calculate the margin level, as mentioned in the previous paragraph, we must divide the net capital (here, since there is an uncompleted transaction, the net capital is 1000 dollars) by the amount of the margin.

Here your margin level is 200. If you lose after opening the trade; to become a Call Margin, you must lose so much that your Margin Level is reduced by 100%. If you lose $500 you reach that limit. Here you get to know the concept of margin call in forex and how it occurs.
Now, if your margin level reaches 50%, i.e. in the mentioned example, you lose another 250 dollars, Forex will automatically close your transaction and you will be stopped out.

Margin call in the stock market (Margin Call)

In this section, we are going to talk about the question of what is call margin and how this concept is used in the stock market. The stock market also works like other markets. In this market, you can make a profit by taking buy and sell positions, but if you misdiagnose the market trend, you will suffer losses. At the beginning of the transaction, an amount must be blocked in your account, which represents the guaranteed amount for the transaction.

Three situations may occur for your account:

• Your account is normal.
• Your account is at risk.
• Your account should be in margin call mode.

Tips on avoiding margin calls

In the previous sections, we talked about what Forex call margin is and how it happens, but here we are going to talk about the methods that prevent this from happening in the financial markets (such as forex), the Iranian stock market and futures markets, and Crypto VIP Signal (Erzdigital) and... .

The first thing to consider is to research the market in which we intend to invest. This point, what is the margin call market and how it is raised and how this happens is very important.

In order to avoid margin calls, it is better to determine the loss limit and to know the rules and regulations for determining the limit of exit losses.

According to the type of market, the trader's strategy, the amount of risk and... The limit of losses can be different. The limit of loss should be the range in which you lost but did not reach the margin limit; determine if the price reaches your loss limit, sell it to prevent the price from reaching the margin limit. This greatly reduces the risk of the transaction.

Another principle that is used to prevent call margin is continuous buying to reduce the average purchase. It is better not to buy your initial capital in one place and after the passage of time, if you reach a reasonable loss, buy again. By doing this, the average purchase will be reduced and the margin limit will decrease accordingly. This will prevent you from being bullied in Forex and other financial markets.

The next thing that we need to pay attention to during Binance Spot Trading Signals is the news that affects the market. The market often goes up or down under the influence of various news. Sometimes, all the technical analysis done indicates that the market is going up, but with news, the rising market can turn down. So, paying attention to the news is very important.

Initial security deposit and minimum-security deposit

In order to better understand the concept of call margin in the Iranian stock market, it is necessary to share with you the meaning of the two terms primary margin and minimum margin. The stock exchange organization introduces the initial security deposit to carry out transactions of any product according to different conditions.

This amount of money means the amount of money that the trader must have in his user account to make a transaction in the desired product. Practically, if there is no access to this amount of money in the user account, there will be no places to enter the transaction to buy and sell the desired item for the trader.

In the meantime, the minimum amount of guarantee in future stock market transactions refers to the amount of money that, if the capital reaches that amount, the user account will be placed in the call margin position. This amount is considered 70% of the initial guarantee for the future market.

What is Remol Call Margin?

But what is the call margin formula and how will it be calculated in the Iranian stock market? In order to complete the Call Margin training, it is necessary to share its formula with you. The formula for calculating Call Margin is very simple and with a little accuracy you can calculate these conditions for your account in Iran Stock Exchange. For this purpose, you must do the following:

Before anything else, you need to know the minimum margin or initial margin for each transaction.

You should calculate the initial margin for all the trades you have open.

Then calculate 70% of the total initial amount.

If your total loss in all transactions reaches the amount of 70%, your account is at the limit of the call margin and you will receive a call margin warning.

Of course, in international financial markets such as the forex market, depending on the type of brokerage, the margin level usually has different conditions and is not always 70%. Even in some international brokers, the margin level is set up to 10%. However, in the Iranian stock market and in brokerages, the margin level (percentage of the user's account entering the Call Margin conditions) is 70% of the guarantee amount.

Types of account status in the market

We should also mention that Call Margin is actually one of the types of account status in the futures market in Iran. The user account of traders in this market is usually defined in three modes, which are necessary for traders in this market to know. The types of account status in the market are as follows:

Normal situation: When you open your trades in the market, some fee will be deducted from your account in the first step. If the Mecca of your transactions is in total profit, in such a way that the amount of your capital is more than the initial guarantee, then the status of your account is defined as normal.

At Risk status: Another type of trading account status in the Futures Signal market is At Risk status. If your transactions in the market incur losses, in such a way that the amount of your capital is less than the initial guarantee amount but more than 70% of it, so to speak, your account status is at risk.

Margin call status: Finally, if your trading losses are such that your capital in the trading account reaches less than 70% of the initial guarantee amount, your account will enter the margin call status. If your capital in the trading account is even 1 rial less than 70% of the initial guarantee, this situation will be defined for your trading account.

Brokerage fees in case of call margin

Familiarity with brokerage actions in case of margin calls is also one of the very important points that we should mention. If the user's account enters into these terms, the brokerage will perform the following actions:

In the first step, necessary warnings are sent to the user in different ways. This means that the broker warns the user to use the various methods mentioned in the previous paragraph and remove his user account from the Call Margin conditions.

If the user does not take any action to remove the user account from the Call Margin conditions, the broker will try to close some of his open transactions in the market to the extent that his user account will enter the risk mode again. Depending on the conditions, such a situation may occur in the trader's user account by closing one or more and even all open trades, for which the broker will take action.

Tips about call margin and its advantages

In the end, we have to share with you some very important points about call margin, which you need to pay attention to for better transactions.

Call margin, although psychologically it may have a negative effect on the trader's mood, but it is actually a trick that prevents the user from much more losses. Therefore, its existence is not so insignificant and ungrateful.

The higher the margin level considered in brokerages, the higher the possibility of losses for the user. For example, if the level of margin level decreases from 70% to 50%, although the trader will call margin later, but calling margin in this situation will be associated with more loss.

Conclusion

In general, this type of trading, which depends on the margin, carries a lot of risk, and trading in these markets requires a lot of experience and knowledge. In this article, we tried to explain what is Call Margin or credit call? And ways to prevent it and we tried to introduce you to it concepts in different markets. But you cannot enter these markets without experience and knowledge. In the global market like Forex, if you don't have experience, you will quickly reach the margin limit, which means that you are no longer allowed to trade and you will lose a lot of money