Spread Can Cause Margin Calls
Spread is the difference between the selling price and the purchase price provided by the broker or market. If the broker provides a selling price and the purchase price of the EUR / USD currency is 1.08575 and 1.08589, the amount of the spread is 1.4. While the margin call is a liquidation by the broker on all open transactions in your account if the usable margin or capital is unable to withstand the loss alias.
Let’s say you have an initial capital of $ 400 and want to open a position by buying a USD / AUD currency pair with the selling price of 0.69861 and the selling price of 0.69881 then the amount of the spread is 2 Pip ($ 0.2) and the margin that you have to provide is $ 2 for every volume of 1000 (1K). The amount of trading volume is 10000 (10K) and you buy 10 times so that your trading volume will increase to 100000 (100K).
When you increase the amount of leverage that was originally 1K to 100K, the amount of the spread will increase to 200 Pip ($ 20) and the margin will increase to $ 200. So we can see that the spreads that were originally only $ 0.2 became $ 20 as leverage increased.
So besides the margin, the spread can also cause a margin call because it is a deduction factor in our capital. Be careful using leverage, calculate the risk factors before opening a trading position.Don’t let you get margin calls before your price movements predict .