What does call margin or liquidation mean?
We come with a very important article in the financial markets. It doesn’t matter if you are a forex trader or a digital currency trader, the important thing is not to call margin. Of course, noob traders usually don’t listen to us until they call margin once or twice. But as a professional trader, you should do your best to avoid this. If you are a digital currency market holder and have used Leverage. Even Leverage 2 can cost you seriously.
But before going to a detailed check of the call margin or liquidation. It is better to talk to you about the conversion. In order to trade, you need to convert your holdings into dollars or Tether. For this purpose, you will need an average and reference price to know which of your exchange will do this conversion for you at a better price. With this in mind, we have put the live price table of digital currencies for you. You can have a valid authority for all your financial transactions.
In order to understand the concept of call margin or liquidation, you must first be familiar with the concept of leverage or leverage. With $100, if you trade on any currency pair in forex, your profit and loss will not be significant. For example, if the Euro-Dollar currency pair moves around 50 pips in Forex, that is considered a big move in its own right. If you have correctly identified this direction.
Your profit from this move will be about 5 cents. You cannot do anything with this profit. On the other hand, this number is also reasonable, because you have little capital. In order for you to be encouraged to trade, you must borrow in your account. For example, suppose you have $100, but you need another $900 to open a 0.1 lot position in a 1-minute timeframe. At this time, you open your account with Leverage 10.
Of course, usually in different leverage or leverage brokers, it starts from 1 and continues up to 50-100-200-300-500-1000. You might think how good it is that the exchange and broker thinks about us and lends us money without interest. But this is not the whole story and the head of the broker is never lost. That’s why you should think better and deeper and don’t enter the market without a profitable strategy.
In the previous section, you got to know the lever in general. But in your opinion, in which sector is the broker’s profit? Is the profit of the broker in giving you leverage and not expecting anything. We must tell you that this is not the case and the broker will give you leverage as long as his money is not at risk. Suppose you have opened a position of one thousand dollars. with an initial balance of $100; Your position is open as long as your loss in the position is less than $100.
When your position amount is more than 100 dollars. Your position will be closed automatically. Because no broker invests in your knowledge. By this time, when your loss reaches 70 or 80 dollars, the broker will ask you to charge your account to close your position. If you recharge your account on time that will not be a problem. Otherwise, when your loss reaches $99.9, all your positions will be closed.
This is called margin call by your broker. Note that you can change the number of your margin call or your account number. For example, ask the broker to close all your positions when your account balance reaches $50. Of course, at this time, it is possible that your account will be margined again due to the spike of “large candles belonging to a higher time frame”. Because your inventory is very low. But there is no problem for capital above 1000 dollars according to your size position.
Well, we have reached a very important issue, and that is liquidation in the digital currency market. Liquidization is just like forex. When your loss reaches the initial balance of your account, your account is simply closed. But you should pay attention to a very important point, and that is that the liquidity pool of exchanges is usually very small. You need to trade in futures in order to receive leverage on your account.
Even when you trade inside a bigger digital currency exchange like Binance. It is possible that it will simply liquidate with a “large candlestick wave movement in sub-1 minute time frame”. For example, if you have used Lorij Do. A strong falling wave will start in the market due to one piece of news. It is possible that simply with two strong candlesticks, the rate of market decline will reach 50%. At this point you are liquefied.
Note that the digital market is a highly volatile market. For this reason, risk management and capital management in the digital currency market must be followed seriously. Note that no matter which exchange you have an account with, you should always be aware of the rapid movements of the market. The digital currency market has profits of several thousand percent. Similarly, it has 50 to 90 percent drops. This may happen to any digital currency seriously.
In this article, we talked to you about liquefaction completely and comprehensively. Of course, we hope that you will never experience this issue. But you should pay attention to Make sure that your account guard is active during the news of the Central Bank of America or during the news of your desired currency pair. For example, even swing traders do not risk more than 5-7% of their account. You should always set 5-7% of capital in your Forex Guard account.
On the other hand, if you have an account in digital currency exchanges. The best thing is to define two stoplosses for your positions. Stop loss for when the market is not volatile. And the second stop loss is for when the market gets excited and your stop position is ignored. If you have any question or challenge about any part of our article, you can simply raise it with us.