Margin calls, and the exit you did not choose

Module 3 established that margin is not a cost. This lesson is about the day it becomes something else: the trigger for an exit you did not choose.

The machinery, briefly

Equity is balance plus open profit and loss, marked continuously. When it falls to the broker's margin-call level, the demand arrives: add funds or reduce. At the stop-out level below it, the broker stops asking. The position closes at market, in whatever liquidity that moment offers - and lesson 4 taught you which moments offer least. A stop-out during a report gap is the worst execution this platform can describe, and it is precisely when stop-outs cluster.

Why commodities reach it faster

Work the example: the moves that trigger the call and the forced close are single-digit percentages of the commodity's price. Module 6's arithmetic - effective leverage times daily range - says days that size are ordinary here. An account that would survive months of an index position's wandering can meet a commodity stop-out in a week, holding a position whose owner believed the margin requirement was the risk.

The stop-out is a symptom

• A properly sized position - lessons 2 and 5 - keeps losses inside a budget the account can absorb; equity never approaches the call.
• Meeting a margin call therefore means the sizing was wrong at entry, whatever else went wrong after.
• The response to one is not a deposit. Topping up defends a position that has already proven it was too large - doubling the stake on the same mistake.

Read the worked example as a post-mortem, not a procedure: every number in it was knowable at entry. The trader who computes them before the trade never meets the broker's version of risk management - which is the entire point of this module.