The Logic of Margin Calculations
Suppose a trader wants to open a position worth $100,000. If the broker sets a 1% margin requirement, the trader only needs to deposit $1,000, while the remaining $99,000 is effectively provided by the broker. This structure multiplies both opportunity and risk. If prices move favorably, gains are magnified. If prices move against the trader, even a minor decline can deplete the account.
Initial Margin (Başlangıç Teminatı)
The initial margin is the minimum deposit required to open a position. Brokers set different ratios depending on the instrument and leverage offered. Major currency pairs may require lower margins, while exotic or highly volatile pairs may require higher margins. The initial margin thus represents the minimum threshold for market entry.
Maintenance Margin (Koruma Teminatı)
The maintenance margin is the minimum equity that must be maintained to keep positions open. If adverse price movements reduce account equity below this level, the trader will receive a margin call. Maintenance margin reflects the trader’s ability to sustain a position under pressure.
Margin Call Scenarios
A margin call occurs when account equity falls below the broker’s required minimum. At this point, the broker notifies the trader to either deposit additional funds or reduce exposure by closing positions. If the trader does not act, the broker may liquidate positions automatically to prevent further losses.
Example Scenario
Consider a trader who deposits $1,000 margin to open a $100,000 position. A 1% unfavorable market move results in a $1,000 loss, wiping out the margin. The account then reaches the stop-out threshold, triggering a margin call. The trader must either add funds or accept forced liquidation of the position.
Different Broker Practices
Brokers apply varying margin requirements, margin call thresholds, and stop-out levels. For example, some brokers may set a 100% margin call and 50% stop-out, while others adopt tighter or looser parameters. These differences influence strategy selection and risk management. High-leverage brokers often expose traders to greater margin call risks.
Connection to Risk Management
Margin trading amplifies both opportunity and danger. Without strict risk management, traders can quickly lose capital. Protective measures include:
- Using stop-loss orders to cap downside risk.
- Keeping position size proportional to account equity.
- Lowering leverage ratios to reduce margin call likelihood.
Conclusion
Margin trading offers powerful opportunities but carries serious risks. Understanding initial margin, maintenance margin, and margin call processes is essential. Evaluating broker practices and applying disciplined risk management allows traders to balance capital preservation with profit potential. When used responsibly, margin trading can enhance returns while keeping risk under control.