Interbank FX (IBFX) explains how its Margin Call works

IBFX, being one of the most transparent brokers out there, is making blog posts almost on a daily basis giving detailed explanations of their services. One thing that should become much more interesting to investors, following the proposed 1:10 leverage requirements, is margin calls. Jeffrey Nuttall, IBFX's trading specialist, gives an overview of how margin call works on IBFX's platform.

IBFX Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term margin calls are significantly different than margin calls in other markets. We do not call our clients to warn them their equity has fallen to dangerously low levels. The leveraged nature of Forex trading does not allow time for a traditional margin call.

Accounts trading with 100:1 margin levels are subject to a margin call when the equity in the account is equal to or lower than 50% of the margin posted. Once this unfortunate situation occurs the Interbank FX trader 4 platform closes trades automatically. Trades are closed in order beginning with the largest loss trades are closed until the equity in the account exceeds the 50% threshold.

IBFX 's margin call policy is in place for the protection of our clients. Margin calls are made with the intent of preventing a client's account from falling into a Negative Balance Negative Balance In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader place In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader place Read this Term situation. Our margin call policy does not eliminate the potential risk that losses will exceed the amount of the deposit. Margin calls are merely our attempt to prevent such unfortunate situations.

The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin call within the time prescribed, your position will be liquidated and you will be responsible for any resulting losses.

Trading in the off-exchange retail foreign currency market is one of the riskiest forms of investment available. Our complete risk disclaimer can be found here: https://www.ibfx.com/Legal/RiskWarning.aspx