Season 1Episode 202:22
Why you can be closed out before your margin hits zero
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Key takeaways
Initial margin opens a position; maintenance margin keeps it open.
Equity is margin plus or minus the open result: 100 down 20 leaves 80.
The risk system can step in before your margin reaches zero.
Quick check
Initial margin is 100 and the position is down 20, ignoring fees. What is the simplified equity?
Try it yourself
Given initial margin 100, unrealised loss 20 and no fees, enter the simplified equity of 80, and spot which fields change.
Show the answer
Equity 80. The maintenance requirement is calculated by product rules and can't be assumed equal to the initial margin.
Transcript
- Sam
There's still money there. Why won't it let me keep waiting?
- Nexubo
You need initial margin to open a position. While it's open, you must also meet the maintenance margin requirement. What you put in at the start isn't how much buffer you'll always have.
- Narrator
Say the initial margin is 100 and the position is down 20. Ignoring everything else, the equity is now 80. If the price keeps moving against you, the buffer keeps shrinking.
- Nexubo
When equity gets close to the platform's maintenance level, the risk system may step in. It doesn't have to wait for zero. It depends on the account type, margin mode and product rules.
- Sam
So if I keep adding money, I'm safe?
- Nexubo
Adding money doesn't change the price direction, and it doesn't guarantee you won't be liquidated. It can pull more money into the same risk.
- Sam
No. One is about opening the position. The other is about keeping it open.
- Nexubo
Check equity first, then how far it is from the warning line.
- Narrator
Put 100 in a box. Is the other 900 safe forever? Next: isolated margin.
- Narrator
Understand first, then act.