I'll explain clearly what a margin call is and why it is important to be cautious about it when trading.

Starting with the basic concept of a margin call. When you no longer have enough capital to maintain your open positions, this situation is called a margin call. For example, you have 10,000 yuan in your account and open full positions, with all 10,000 as margin. At this point, the risk = 10,000 / 10,000 = 100%.

But if the market moves against you, and your account balance drops to 9,000 yuan, the risk increases to 90%. You have lost 1,000 yuan. This is what I mean by a margin call — the account has experienced actual losses. The brokerage usually sends a notification asking you to add more margin at this point.

Next is forced liquidation. If the situation worsens, and you lose 4,000 yuan, the risk becomes 60%. The brokerage will automatically liquidate all your positions. Your account still has 6,000 yuan, but you can no longer trade.

Then comes the worst-case scenario — a real margin default. Suppose you lose 12,000 yuan, and the risk becomes -2,000 / 10,000. Your account balance is negative, meaning a complete margin default. You not only lose all your capital but also owe the brokerage 2,000 yuan. That is the trading margin deposit paid by the company to the exchange.

Many people may confuse margin default with forced liquidation, but they are actually different. Forced liquidation is intervention by the broker, while a margin default means your account is in the negative.

The most important thing is not just the precise definition, but that you must always monitor your account risk. Understanding your risk situation is the only way to avoid these scenarios.

Finally, if a margin default occurs, you need to repay the debt to the broker. If you do not, it will be reported to the credit system, potentially leading to being blacklisted from the market or facing legal action. Therefore, manage your risk carefully from the start. That is the most basic principle when participating in trading.