Important Values of a Margin Calls

Considerations
The important values that trigger a margin call, the margin equity, can change quickly. Assets in the amount of $10,000 purchased with a 50 percent margin loan have a margin equity of $5,000. A maintenance requirement of 25 percent represents a cash value of $2,500.

If the value of the assets declines to $8,000, the outstanding loan is still $5,000, so the margin equity becomes $3,000, and the maintenance level of 25 percent represents $2,000. At a total asset value of $6,000, the equity is only $1,000 but the maintenance level (25 percent of $6,000) is $1,500.

A margin call would be issued to generate the difference. A precipitous decline could cause investors to lose more than their initial investment.

Upon issuing a margin call, a broker usually expects account holders to bring their equity in line with the maintenance level immediately or at least by the end of the trading day.

Though a margin call alerts the account holder to the situation, it doesn't necessarily provide much opportunity to be proactive and prioritize stocks for liquidation. Concurrent with the issuance of a margin call and without warning, the broker can begin to sell assets in the account.


Margin Deals, in finance, transactions in which a purchaser buys securities by paying a percentage of the price and pledging the securities to guarantee payment of the balance of the price.

For example, an investor pays a broker a specified sum (margin) toward the purchase of shares of stock. The broker advances as a loan the remainder of the money needed to purchase the shares.

If the price of the stock remains constant or rises, the broker's loan is protected. If the price begins to fall, the broker notifies the investor that the stock will be sold unless an additional margin is advanced.

One of the worst pieces of news an investor can receive. Not only does it mean the value of his assets has declined, it could mean he has to deposit more money in his trading account. Margin calls are issued by brokers according to the terms of a margin agreement, which specifies the terms by which the broker lends funds to an account holder. The Federal Reserve regulates margin accounts and the terms of a specific margin agreement.

The purpose of a margin call is to inform an account holder that the equity in her stock positions has dropped below the minimum required maintenance level, and to activate certain provisions of the margin agreement. The federal reserve mandates a maintenance level of at least 25 percent, though some brokers set a much higher bar. In response to a margin call, investors must liquidate assets in their account to raise cash or deposit additional funds in their account.

Advantage of Forex Trading

Presently, the FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions.
The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements.
Since then, the market has continued to grow. According to Euromoney's annual FX Poll, volumes grew a further 41% between 2007 and 2008.

The purpose of FX market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, etc., and the need for trading in such currencies.

Although the Forex market is by far the largest and most liquid in the world, day traders have up to now focused on seeking profits in mainly stock and futures markets. This is mainly due to the restrictive nature of bank-offered Forex trading services.

Huge market
Approximately three trillion dollars are being traded everyday in Forex, making it bigger than world stocks, future markets and bonds
Low startup: For trading in Forex, one can begin with as low as 50 dollars

Volatile
It is the most unstable market of the world, which means one gets great opportunities every moment while trading

Low cost
While trading in stock, options and futures, you give commission and spread, with foreign exchange your just cost of trade is spread

No cornering
Unlike the other markets, cornering the foreign exchange market is improbable. Regardless of the total number of people trade with same robot, the profitability and efficiency will remain unharmed, which is a huge plus point

Up and down
Earnings from falling and rising prices, you do not concern the way the market goes and unlike the stock market you need not wait for up tick for shorting.

No size limit
Trade small or big, as per your choice, as Forex trading allows you to trade the way you want.