What is a margin call in trading?

A margin call occurs when a trader's account falls below the required margin level set by their broker. This typically happens when the market moves against the trader's position, resulting in the equity of the account falling to an insufficient level to maintain the leveraged position. When a margin call is issued, the trader must deposit additional funds or liquidate positions to restore the account to the required margin level. Failure to respond to a margin call may result in the broker closing out positions to minimize potential losses. Understanding margin calls is crucial for risk management and ensuring that one maintains adequate liquidity in their trading account.