Margin calls are conditions that you must avoid to succeed in forex trading. Besides, margin calls occur when losses continue to grow. A margin call occurs as a warning for you to immediately add a margin to continue the transaction. If not immediately, the broker will auto cut or close (liquidate) the position. Accroding to Fidelity, to avoid margin calls, you need to understand fully what triggers a margin call, along with the steps you can take to minimize the risk of a margin sellout.
Thus, what are the things cause the margin call to occur?
1. Do not install a stop loss
Not a few beginner traders do not care about stop-loss because they do not want to limit the profit opportunities to be achieved. We recommend that you do not see a stop loss as a barrier to your profit opportunities but as a limit to your loss so it does not continue to grow.
2. Using a large lot size
Increasing the lot size to get a profit opportunity is the right way. However, keep in mind that the profit opportunity is directly proportional to the risk opportunity that you will get. The greater the lot, the greater the profit opportunity while increasing the risk opportunity. Thus, you should use the leverage facility wisely so you can avoid margin calls.
3. Don’t have a trading plan
Risk management and money management are included in the trading plan. Thus, it’s not just planning what strategies will be used for position entry. Analyzing the market without a trading plan can be said to be futile because market volatility is inevitable. Without clear planning, it will even lead you to the wrong entry position.
4. Lack of knowledge about forex
Most novice traders start trading forex without sufficient knowledge. When they decide to enter the forex market, they only eliminate their capital without the slightest profit.
5. Trading with emotion
Forex trading can not be run with emotions that come from ambition to get as much profit as possible. The world of trading is about risk management. At one time you could get an abundant profit. However, without good risk management in a short time, the profit could turn around to erode your margins and invite a margin call.
When you get a margin call, it means you have not been successful at that time. We guarantee it will not be an obstacle to your continued success. The opportunity to succeed in trading is always there for those who are serious. Good luck, traders.
Read more: 10 Trading Principles to Maximize Your Trading Profits (1)
