Ethan S_ Morris#2

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What is a margin call in forex and how can traders avoid it?

A margin call occurs when the equity in a trader’s account falls below the required margin level, forcing the broker to request additional funds to maintain open positions. In forex, this happens when leveraged trades move against the trader, and the balance cannot support the required margin. Institutions avoid margin calls by using risk limits, stress testing, and diversified portfolios. Retail traders can prevent margin calls by maintaining buffer capital, using stop-losses, and adhering to conservative leverage. The benefit: margin calls protect brokers but can lead to forced liquidation, erasing profits or even account balances. Risk management strategies like reducing leverage, trading smaller sizes, and following disciplined entry/exit rules can prevent margin calls and ensure sustained participation in the forex market.