Why Maintenance Margin Important In Keeping You From Running Losses in Your Account
What is maintenance margin? The amount of money that has to be in your account to keep a leveraged transaction open is called the maintenance margin, also known as the variation margin. It ensures you always have enough cash to cover any running losses and finance the position’s current value. A particular amount of money must be paid and held in your account to maintain an open leveraged position. For example, your deposit might need to be increased to keep the transaction if your situation begins to lose money. Your broker will request that you contribute extra funds to balance your account. An example of this is a margin call. The essentials of maintenance margins Before delving deeper into maintenance margins, let’s briefly discuss margin trading. It involves buying assets using the money you borrow from your broker. Margin trading enables individuals and organizations to purchase more stock in aContinue Reading