Avoiding margin call is often a scourge for novice traders. In the blink of an eye, your funds can be sucked up or forfeited. Trading experts argue that those in the forex business will generally experience this. It is important learning to deal with the right management.

Margin Call (MC) is a notification from a broker to a trader to add funds to an account. This is motivated by the occurrence of price movements that cause traders' losses. The added funds will be a guarantee that the trader can complete his contract when needed.

MC appears when your funds are running low. When the MC says hello, it means your fate is on the line. This condition is a disaster for traders. It is imperative to understand how to handle MC by learning from the best forex broker such as Didimax.

The Reason Why a Trader Can Experience Margin Call

There are various causes of a MC. But there are two main reasons you need to know. First, traders are sometimes too confident when trading. Usually, this over-confidence arises when new traders make big profits. He felt the market and the fortune god were on his side.
 
This motivates traders to risk their current capital by opening new large positions. Being too brave to open a position sometimes makes traders ignore analysis results that are not in line with market conditions. It is absolutely not the way of avoiding margin call.
 
Although the results of the analysis are not always accurate, it should help you read market conditions more carefully. Ignoring it and being too sure to open too big positions often results in a floating loss. No need to wait long, the broker will send you an MC.

Second, MC can be caused by overtrading. When you feel overly confident, it often affects trading behavior based on emotion alone. Trading activities are underestimated, only use feeling without careful calculation. For example, you can put your stop loss wrong.

Instead of resting and evaluating, you choose to enter the market and open a new position with an even bigger size. After doing that, you just realized that the available capital was limited. However, forex trading requires strategy and careful consideration.

When opening a position, make sure you have a strong margin to withstand the risk of bigger losses in the future. Try to control your ego so you don't rush to prove the results of the analysis without careful calculations.

How A Pro-Trader Avoiding Margin Call

The good news is, you can avoid margin calls. However, you cannot eliminate the risks that may arise from MC. That's why you need a surefire way to deal with MC, namely by doing risk management and money management. Didimax forex broker always recommends this.

Having a solid foundation of risk management should be important for novice traders. Risk is a consequence that you must face when you are in business, including trading. By mastering risk management, you can reduce the risk of doing business to maximize the opportunity for profit.

In risk management tools, several ways can help you avoid MC, namely the cut loss method, switching, averaging, etc. Immediately closing a losing transaction is an action taken using the cut loss method. This step is taken so that you avoid the risk of greater losses.

You should not just cut losses if you are just based on the feeling that the current price will touch the stop loss. Remember, you must be armed with a proven basis of analysis to take action when trading. So, do cut loss objectively and rational.

If suddenly there is a drastic price movement, try the switching method, which is to close a losing position and take a new position in the same direction as the price movement. You can recover losses due to previous trading positions and avoiding margin call.

However, this method should be used if you believe the market is moving fast enough. It directs you to open a new position with an image of the risk of loss that might arise if the market reverses again. You will need a high level of mental readiness.

According to Didimax analyst, risk management will help you take appropriate responsive action after observing market movements. Meanwhile, money management helps you control your financial condition so you can stay in the forex trading business for the long term. It also will help you avoiding margin call.