Definition & Examples

A margin call is:

Margin in trading refers to buying an asset, where the buyer pays only a percentage of the asset’s position value and borrows the rest from the bank or a broker:

Margin is the amount the investor puts down on the account, typically expressed as:

If an investor wants to buy a 10,000 dollars future contract on margin, and the margin is 20%, this means we need to have […] off the account’s value:

The leverage of an average company doesn’t equal 100 times your initial investment:

For example, one lot equals 100,000 dollars, and half a lot equals 50,000 dollars. Thus, we buy a Euro versus the US dollar 50,000 dollars value of trade, which is […] lots:

Having 5,000 dollars in the account, the maximum leverage I can carry in my account is […] dollars:

For example, we have 190,000 dollars value of trades trading right now on our account. So, 100 divided by 500,000 dollars and half a million times 190,000 dollars will give me the percentage of margin being used, which, in our case, is:

Considering the example above, I am not allowed to use half a million dollar value of trades:

Leverage is the money I’m allowed to use, and margin is the percentage I’m using or free to use on my accountability: