You can often hear how beginners make a critical mistake, not expecting to receive a margin call during their trading, or, as it is pronounced in Russian, a margin call. The result of not knowing what it is usually becomes a merged account in the Forex, stock or derivatives market. Getting the basic knowledge of the world of finance, which creates a solid foundation for success, will help to avoid an unpleasant situation.

Without an integrated approach to gaining knowledge, the fate of a trader will be sealed. This is especially painful if borrowed money, investor capital in PAMM accounts, and so on, were used to replenish the deposit. Therefore, we will continue to study the materiel, finding out what a margin call is and how to prevent its occurrence.

Types of lack of funds on deposit

Touching upon the topic of a margin call, it is definitely worth briefly mentioning the stop out along with it, although there is a separate article for this last one that reveals all the nuances. So let's get started.

To begin with, let us recall that financial speculative activities are carried out by traders using the margin trading system. That is, the broker provides its clients with leverage, which allows them to turn large capital with a small deposit, receiving decent profits from this. For Forex, the standard leverage is 1:100, and more aggressive trading with the help of trading advisors even allows the bar to reach 1:500 or even 1:1000.

For the stock and futures markets, such sizes are unusual, since you rarely see more than 1:20 there. But the bottom line in all cases is that the trader trades on the borrowed capital of the broker. With such a mechanism, the intermediary needs guarantees. Therefore, by providing a loan, the broker freezes part of the funds on the client's account, which act as a guarantee for opening a position.

Further, this amount of frozen capital may vary depending on the trading conditions of the broker and the situation on the market. For example, if a position incurs losses, then the broker, in order to protect his interests, will require a larger amount from the trader to ensure the current transaction. In this regard, every experienced trader, when calculating the volume of a transaction, always makes sure that in the event of an unsuccessful development of events, he has enough money in his account to maintain the position.

If there is not enough money, then the so-called Margin Call comes. But more about it later. In the meantime, let's give an example of how it is displayed in the popular MetaTrader 4 (MT4) terminal and its newer version 5, since they are used by the vast majority of all Forex traders.

So, open the terminal, make a deal and pay attention to the lowest tab "Trading" (Trading), which looks like this.

Here, in the line highlighted in gray, there are several options that you need to consider when working on foreign exchange market Forex:

1. The first parameter Balance (Balance) shows the overall status of the account and the amount of available Money accumulated by replenishing the deposit and fixing profits.
2. Next comes the Equity parameter, which shows how the Balance changes during an open transaction - if there is a profit on the current position or positions, then its size is summed up with the balance and displayed as a single number, but in case of current losses, their value is subtracted from the balance amount, showing the trader the real state of affairs on the deposit.
3. The Margin value gives the trader information about how much of the balance is "frozen" and cannot be spent on securing new trades.
4. The Free Margin parameter, in contrast to the previous one, says how much money from the deposit can be used in order to open new transactions.
5. And the last value Level (Level) Margin Call gives an idea of ​​how much free margin the trader has available, but this parameter is displayed as a percentage. This makes it easy to assess how strong the current load on the deposit is. Reading this value is simple - the larger it is, the better.

The level or Level the trader must constantly monitor in his trading, since at certain values ​​it is precisely the Margin Call and Stop Out that occurs. Here you need, first of all, to know how the margin call is calculated at the broker, which we will talk about below.

What is margin in the foreign exchange market

It should be noted that the English term margin call has not only the Russian equivalent of margin call. Often there is just an abbreviated name - margin, and sometimes they jokingly add - kohl. So, having met somewhere on the forum a message that Margin Kolya came to visit the trader, you need to understand it this way - the deposit was under attack due to an unsuccessful transaction.

Now let's consider what a margin call is, how it differs from a stop out, and what results it can lead to. Previous transactions for stock exchange and futures market were concluded by phone. The trader called his broker and asked him to buy/sell the required asset at a certain price. In turn, the broker monitored the positions of traders, as he lent them money as part of margin trading. And if there was not enough money on the account to secure the position, then in this case the broker called (call) the client and said that the margin level needs to be raised - that is, it is necessary to put more money on the deposit. This is where the term in question came from.

Unlike a margin call, which acts as a warning and recommendation, a stop-out is a forced closing of positions by a broker if the trader has not added funds or deposited them in insufficient quantities. It is important to understand that the broker will never risk his capital in order to satisfy the interests of the trader, therefore, as soon as the Free Margin level drops to critical values, a margin call will immediately follow, and then, if there is no reaction, a stop out.

The described scheme is still working on real stock markets, derivatives markets and so on. In Forex with high leverage, the difference between a margin call and a stop out is usually very insignificant in time, so usually these two events happen almost simultaneously. In such conditions, the broker practically does not have time to warn the client and receive money from him, therefore it is extremely important to correctly allocate capital, set stops and control the situation on the Forex market on your own.

Pay attention to margin levels when opening an account

Different brokers can have completely different Level values ​​on separate accounts. Therefore, you always need to know when the margin call comes, and then the stop out. These values ​​are important to study, compare and take into account in your trading, especially if it allows for large drawdowns, such as when using grid Expert Advisors.

Below is a table with stop out and margin calls levels for popular Forex brokers. Having studied it, it is easy to see how much the trading conditions differ in places.

Analyzing the table, the trader should understand that the lower the level, the better, since the account can, in which case, without dangerous consequences withstand a large drawdown.

In addition, you can see that Alpari and GKFX do not have a margin call level at all. These brokers believe that this phenomenon among Forex traders is an anachronism that needs to be eliminated. It is enough to leave only the stop-out level in order to know at what load on the deposit the broker will forcibly close the trader's positions.

By the way, today each speculator can independently set some specific level in the terminal, at which he will receive a notification that the drawdown on his account reaches critical values. Actually, experienced traders do just that, especially since now you can even set up receiving danger alerts on your phone or email.

Stock market and margin

For stock markets, it is important to know at what MAC a margin call occurs. In this case, UDS - the level of sufficiency of funds. This indicator is calculated as follows: The minimum margin is subtracted from the portfolio value, after which the resulting value is divided by the difference between the initial margin and the minimum.

In this case, it turns out that when the MAC is less than one, a margin call occurs, and when the MAC is less than zero, a stop-out occurs with the forced completion of all open deals. A similar algorithm is used, in particular, in the Quick terminal, which is popular among Russian traders.

Understanding now what a margin call is in the stock market and Forex, the trader has filled in another important gap in the basic knowledge that should serve as an unshakable basis for his activities.

Kind.

It is important to profit from your actions, otherwise, if the position is unprofitable, it is better to lose a little, quickly and immediately, than to lose a lot and for a long time - time-tested. This will probably be the fourth edition of the systematization of my own thoughts and observations over the past five years, and as a result of my own rules.

This post will be more related to intradays and speculators who build their trading on the use of leverage on the stock market of the Moscow Exchange. When you receive a big loss and do not close it in time, it becomes difficult to part with it, cherishing the hopes of making a profit, which in turn creates selective thinking in the future - in the direction of your own position. What awaits under such a scenario?

Anyone who has not exited a losing position for any reason - averaging, stupidity, tilt - is obliged to fight at his own expense. You need to know exactly the MAC, because if the MAC is less than 0, the broker will forcibly close the margin positions, restoring the MAC to 1.0, while the loss will be about 60% of the account.

All strategies for holding a marginal loss-making position, except for fixing losses immediately (stop) or going almost to breakeven when testing the price of a broken support or resistance (this is more risky, since the price often squeezes without a return and starts trading in a reduced range for a long time) if not executed own conditions for a profitable entry, will be extremely risky and have an extremely low probability of bringing the position into profit. It is very difficult to predict low or high prices with a turn in time, and this time, together with the broker's commission, will destroy the depot every day. There are always and will be opportunities to earn, which are available only to the depot and the mind free from losses.

You can gain a large unprofitable margin position by trading against the trend, catching a reversal, that is, without confirming the reversal on the price chart. Indeed, in the second case, the settled price level and movement from it are traded, and in most cases the stop is at the entry point, which is practically a breakeven. But by catching knives, or trading against the price movement, they drive themselves into big losses, and the stop loss already incurs a significant % loss. It is more expedient to trade against the price movement in a sideways trend, otherwise the result of this movement will be in the future and one can only guess where the stop will be. When trading on the price movement, you have to wait, but you are already trading the present - the result of previous trades.

Everyone has a different speculation strategy. Someone trades when the price rebounds from someone's level where the trade was going on, someone catches a reversal, trading in opposition to the price movement. Both strategies have a place to be, and both make a profit, limiting losses is important. Losses in both cases of speculation are a natural part of trading. And this must be taken for granted. But the ratio of profitable and unprofitable trades and the size of the stop profit allows the account to either grow or decrease.

UDS - Funds Adequacy Level
= (Portfolio Value - Min Margin) / (Initial Margin - Min Margin).
On an account with no open positions, MAC = 9.99.
UDS< 1 – Ситуация движется в сторону принудительного закрытия позиций Клиента;
UDS< 0 –После наступления этого события Брокер обязан произвести принудительное закрытие позиций Клиента.

If your MAC account is already 0.2, you should start discounting lots and be ready for even bigger discounts for a positive MAC. If the account is not large and there are funds for topping up, this should be used, so you can reduce your shoulders, restore the UDS, thereby reducing the daily commission. But it is not recommended to trade on the released shoulders, as there is a lot of psychological pressure. Must wait. And it will be a struggle for the survival of one's own account, which is being experimented on (it's hard to call it differently), but if this is the struggle at the expense of borrowed money or funds under management, then you need to stop and radically reconsider your trading. I also drove my account into a drawdown for the experiment, and when the MAC was below 0.2, I placed stops, as there may be powerful straits or the lack of a monitor or a technical restriction on access to trading (computer and program failure, Internet, electricity). But the stops need to be adjusted every day, since the account decreases due to losses (daily commission from the shoulders), the MAC decreases and the stops need to be adjusted and set before canceling.

All this is an extremely neglected state of a losing position. In fact, for profitable trading, it is not allowed to allow a peak of the depot, with only the hope of a price return. The entrance is always performed according to its own developed rules, as well as the exit. You have to be ready for any scenario of the development of events, hang up - you should not tilt. And if the price goes against the position, you must admit the mistake immediately and get rid of the loss when it is still small. And if the MAC of the accumulated leverage is slightly more than 1.0, then the loss fix will be several hundredths of the MAC lower (there was a MAC of 1.05 - fixing at a MAC of 1.02), and this is a few % of the loss on the account. If you are always at the monitor, then you can close it with your hands, but this is extremely dangerous (a technical failure of the equipment is a lack of control), and even if you move away, stop and take profit until canceled. Dozens of times I watched how the price, breaking through support or resistance, rapidly moved against the position and after averaging (improving the average), the price, having made a correction to the movement, approached the average (BU), and it was fixing there that made it possible to avoid large losses when the price movement resumed against the position. This loss exit strategy is much riskier than a stop loss, but allows you to exit with smaller losses, of course with a 50/50 chance, instead of a fixed stop loss, which is an increased risk. Averaging is a fortune-telling and protracted action that puts at risk even more large sums with additional losses from price reduction, turnover commission and margin commission. At the same time, you need to remember that when averaging, the price is already much lower than the average position price, and this is already a big loss, much more than the loss of a regular stop. You need to cover losses immediately. And work on the correctness of entries and exits, analyzing transactions - increasing experience and means in management.

Losses must be closed immediately, and when averaging, very often the price rolls back and reaches the average price (tempting and giving hope for a profit), giving the smart ones (who immediately admitted their mistake) the opportunity to go to 0 or with a minimum loss, but if this is not done, then the result will be obvious - this is a drain of part of the account ... From this we can conclude that it is less risky to sit out price drawdowns for investors who are in long positions and only at their own expense. Of course, this is also a big question and whether many of them survive. Investors are not threatened with a margin call, but they are threatened with multiple depreciation of the paper, where the time factor and the issuer's policy play. Holding unprofitable positions with leverage in short or long positions is a very big risk, and in most cases these losses are directed to Margin Calls.

Margin Call is a circumstance under which a broker closes a losing trade. This happens when the level of sufficiency of the account's funds approaches 0, or when the price moves in the wrong direction, when the account balance, which is necessary to maintain the margin of all active transactions, approaches zero.

And for those who read to the end. I will reveal one secret. There are a lot of variables that affect the price movement, knowing all of them, linking them into logical chains and quickly making the right decisions is a lot of work for many years of trading and introspection, despite the fact that the market is constantly changing. Indicators create only the illusion of control over the price movement. It is much easier with long money to collect a portfolio and pull for years or months with fast movements. Many stocks move in different directions, compensating for the loss on the account as a whole - they took the paper by 10% of the account, and the price sank by -5-10%, so what? the loss is only -0.5-1% on the position. And with 3-5 leverage, the loss is already -15-50%! And where is it easier to reset the account? That's right - it's trading and guessing with a maximum of shoulders, without limiting losses, and without fixing profits. So, you need constant control over losses and profit!

P.S. Hello intradays! Snow, your work has always impressed me, continue, because for some reason it is necessary.

Attention! From March 27, 2014, new rules for making unsecured transactions (margin lending) come into force. Please see .

Margin lending consists in providing clients with additional assets (cash or securities) secured by their own for transactions in the stock market. You get the opportunity to use "leverage" - more money or securities than you have available, and earn additional income. The use of a larger volume of assets (due to borrowed funds) allows you to increase the volume of operations and their profitability, as well as earn money in both a growing and falling market.

You can connect to the service at the company's office or in the "Account Settings" section of your personal page in the DOHOD Client Center system

Benefits of margin lending

Types of margin lending

Cash lending

You buy securities with your own funds and with funds provided to you by a broker (under the terms of a margin loan), and when the securities grow in price, by selling them, you will return the loan and receive additional income from the use of additional money.

You think that the price of a share of company A will grow and buy 20 such shares at a price of 100 rubles. per piece (for 20 * 100 \u003d 2000 rubles) - 10 at the expense own funds(1000 rubles) and 10 at the expense of funds provided by the broker (1000 rubles)

When the shares of company "A" rose to 110 rubles. You decide to sell them and from the proceeds (20 * 110 = 2200 rubles) you return 1000 rubles. a loan to a broker, and your income is 200 rubles. Since your initial capital was 1000 rubles, then the profitability of the operation was 20% (200/1000 * 100%), which is two times more than in the case of using only own funds.

Securities lending

You borrow securities from a broker and sell them on an exchange (“short” or “short”). When the price of securities decreases, you buy them at a lower price and receive income equal to the price difference.

You think that the price of Company B's share will go down and you take 10 of these shares from the broker. You sell these shares on the stock exchange at a price of 100 rubles. per piece (only for 10 * 100 = 1000 rubles) and get 1000 rubles. cash.

When the share price of company "B" fell to 90 rubles. apiece, you buy them back for only 900 rubles. (10*90=900 rubles) and return them to the broker. Your income from the operation amounted to 1000-900 = 100 rubles.

Provision and expenses of the client

Margin lending accepts cash as collateral, as well as securities that meet the liquidity criteria.

Intraday (trading session) margin lending is provided FREE OF CHARGE.

The amount of funds provided (the amount of "Leverage")

The amount of funds provided depends on the amount of collateral calculated taking into account discounts for each particular security. Cash is treated as collateral in full.

Criteria for classifying a client as a high-risk investor:

• Independent work on the stock market for at least 6 months (including through another broker) and the amount of cash and the market value of the client's securities is at least 600,000 rubles.
• OR the amount of assets on the account is at least 3 million rubles.

If you would like to be able to trade "with a higher level of risk", please contact the customer service department.

Discount is a risk parameter of a financial instrument that depends on the level of market volatility and liquidity of the instrument. For simplicity, leverage two, equivalent to a 50% discount (=1/0.5=2). The smaller the Discount, the larger the leverage. In fact, the discount determines the value of the financial instrument (for example, shares) used as collateral for margin positions. For instruments traded on the Moscow Exchange, the discount is set by the National Clearing Center and can be changed at any time (so you should carefully monitor the value of your portfolio when the collateral level is close to critical).

Risk parameters (discounts) of traded instruments can be viewed on the NCC website in the "Risk Management" section, as well as in trading system Trade –> CCP –> Market Risk Parameters or in the Buy/Sell table.

Collateral control and risks

Trading using margin lending ( margin trading) associated with high level risk, and there is a risk of losing all capital or even an amount exceeding the initial investment. Please read the Declaration on the risks associated with transactions with securities and other financial instruments (paragraph 3 is devoted to margin lending).

To control collateral, the Company calculates and monitors the following key parameters:

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