What is margin in forex?
Margin is the amount of equity that must be maintained in a forex trading account to keep a position open. It acts as a good faith deposit by the trader to ensure against trading losses. A margin account allows customers to open positions with higher value than the amount of funds they have deposited in their account. The margin available will limit the size of your position. You can not open a position with a size bigger than the available margin. The margin requirements depend from broker to broker. Most popular brokers require 2% to .5% margin, which of course is relevant to their leverage. If you’re broker offers a leverage of 100:1, you’re margin will be 1%; if a broker requires a margin of 2%, you’re leverage will be 50:1 (100:2).
Margin call in forex is called the action that your broker takes by closing some or all of your open positions at the market price when your margin is no longer sufficient to cover your losses. In other words when you’re equity is equal to your used margin, which means you are out of available margin then you’re broker takes actions to prevent further losses, therefore closing your positions.
How to Avoid margin call?
There are some several way to avoid margin call
1. Good money management, manage how you trade
2. Use stop loss for every position if you don't have enough margin
3. Do not over trade :)
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