I just received questions from some new traders about what a margin call is and why they get margin called when trading with leverage. This is a pretty important issue, so I want to share it with everyone.

Simply put, what is a margin call? It is the situation when your margin account drops below the maintenance margin level set by the brokerage. When a margin call occurs, you will receive a warning and need to manage your position; if not, the platform will automatically liquidate it for you.

In fact, margin is a loan provided by the broker so you can trade with a larger amount of money than your actual capital. But the cost is that the risk also increases accordingly. When you trade with high leverage (for example 1:10 or 1:20), a small price movement can quickly cause your account to hit the margin call threshold.

When does a margin call happen? The calculation is quite simple: Account value = Loan value divided by (1 minus the maintenance margin rate). Or you can calculate: Remaining value divided by the initial trading value; if the result is less than or equal to the maintenance margin rate, a margin call will occur.

Let me give a real example: You buy 10 lots of Apple stock at $145 with 1:10 leverage. Your account will be margin called if the Apple price drops to about $137.3. So, to stay safe, you need to keep the price above this level.

How to handle a margin call? I see three main ways. First, deposit more money into your account to increase your equity, but this carries risk if the price trend continues against you. Second, close your position to avoid deeper losses from liquidation. Third, reduce your position size (sell some) if you still believe in the trend.

What should be avoided? Many new traders often use margin to average down losses when facing a margin call, which is a big mistake. Doing so only deepens the loss.

To avoid margin calls, you can apply some measures. First, always set stop-loss orders immediately when opening a position. Second, if you're new to the market, trade with low margin to have time to react if prices go against you. Third, keep enough equity to withstand strong market fluctuations. Finally, don’t open too many positions at once; just 1-2 positions for easier management.

By the way, if you don’t want to worry about what a margin call is or getting liquidated, you can choose to trade without leverage (1:1 ratio) on platforms like Mitrade with zero commission and zero overnight fees. This method is suitable for those who want to hold assets long-term.

In summary, a margin call is essentially a protective mechanism of the trading platform, but it also signals risk for traders. You need to understand how it works, when a margin call occurs, and how to handle it properly to protect your account. Make sure you have enough knowledge before using margin.