Margin Level, Margin Call and Stop-Out

MARGIN LEVEL

Margin level can be calculated as,

Generally, you will not want for our margin level to fall below the margin call level which is set by your Broker.

If they do fall from the margin call level, you will not be able to open a new position and your account will be warning you that you need an additional deposit so that your current position will not be closed automatically. 

In addition, falling from a margin call level is not healthy to a trading account since there is a big chance that you'll blow up your account when it reaches the Stop out level.

Stop out level is the value set by your broker where they can automatically close your open position when your margin level gets to this value. This is also used to prevent negative balance in a trading account.

For example,

Stop Out Level was set to 50%, when your margin level falls below 50%, it will close your open position until your margin level is greater than the stop out level. 

HOW TO AVOID A MARGIN CALL?

You may want to avoid multiple positions opened in your trading account. Especially if you have a small capital in your Balance.

Utilize Stop Loss in your trading platform. DO NOT ENTER THE MARKET WITHOUT A STOP LOSS TO PREVENT A HUGE LOSS ON YOUR CAPITAL!!!

You're almost equipped with basics of Forex trading. You may now proceed in learning the different types of Market Orders when trading currencies.