What Is Margin Call? Meaning & Example
Definition
A margin call is a demand from your broker to add funds or reduce positions when your account equity falls below required levels. If you do not act, the broker may sell your holdings.
Related terms
Margin is money borrowed from a broker to buy investments, or the collateral required to hold a leveraged position. Trading on margin increases risk and involves interest costs.
LeverageLeverage means using borrowed money or derivatives to control a larger position than your own capital alone allows. It magnifies both gains and losses.
VolatilityVolatility measures how much and how quickly prices move. Higher volatility means bigger swings, which bring both more opportunity and more risk.
What is Margin Call?
A margin call is a demand from your broker to add funds or reduce positions when your account equity falls below required levels. If you do not act, the broker may sell your holdings.
Can you give an example of Margin Call?
If leveraged positions drop sharply, you may receive a margin call asking for more cash by a deadline.