Margin requirements apply only to margin trading. This allows you to hold positions much larger than your actual account value. Margin deposit requirements or not the down payment. Rather, the margin is a guarantee of execution, or both the main deposit, to ensure against trading risks. Automated trading platforms are pre-trade margin check availability and will execute trades only if you have sufficient margin funds in your account.
In the event that the funds in your account under the terms of the margin, the trading system will automatically shut down one or more open positions. This is to prevent your account from ever falling below the equity available in the market that is moving very fast.
For example, you may be asked to have $ 1,000 of the total quantity you are buying or selling in your account to trade a position that would normally require $ 20,000. and a $ 1,000 (5%) is called the “margin”. This amount is essentially collateral to cover losses that may occur. Margin should reflect some rational assessment of potential risk in a position. For example, if the instrument of the market is very volatile, a higher margin requirement would normally be justified.