You might have to deposit cash or additional securities into your account, or you might need to sell securities to increase the ratio of assets you own entirely to the amount you borrowed.īefore we delve further into the specifics of what circumstances might lead to a margin call-and how you can avoid one entirely-you first need to understand how margin trading works. Margin Call DefinitionĪ margin call is a warning that you need to bring your margin account back into good standing. Perhaps the biggest risk of margin trading is the dreaded margin call, which can force you to liquidate a lot of securities quickly-even if it’s at an enormous loss. While buying on margin can increase your returns, you also face more significant risks when investing with borrowed money. Trading on margin allows you to borrow money to buy securities, like stocks, and make larger investments.
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