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Margin Call
Margin trading can amplify your gains but it can also amplify your losses. When your account equity dips below the required level, a margin call kicks in, signaling you to add funds or close positions. Ignoring it can lead to liquidation and steep losses.
Think of it like a credit card warning. When you're close to hitting your credit limit, the bank gives you a heads-up. Similarly, a margin call is a red flag that your trading account is nearing its limit.
Let’s break it down: if you buy $10,000 worth of Bitcoin with 5x leverage, borrowing $8,000 from the exchange. If Bitcoin’s price drops by 20%, your equity plummets to $6,000 triggering a margin call. At this point, you need to either top up funds or reduce positions to avoid liquidation.
Understanding margin calls is vital, especially in volatile crypto markets. By staying aware, you can manage your risk and protect your capital. Don’t let a margin call take you by surprise stay vigilant and trade smart. 0 reply
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