What are margin calls?Margin calls can be one of the worst things that can happen to a trader. It can be a devastating thing that will often come at the worst possible time. You need to watch out for this. So, what is it?Well let us say that you bought 100 shares of stock XYZ for $60. This cost you $6000. You also wanted to get some leverage. So you borrow $6000 more dollars from your broker to buy 100 more shares. This is called buying on margin. Now you have 200 shares of stock XYZ. This is a good company. You plain on holding this stock for the long term. But suddenly a market crash happens. Your stock keeps falling. You don’t sell because you want to hold the stock for the long term. Eventually stock XYZ is trading at $30. Your broker gets worried that you cannot pay him back. He tells you that you have a couple days to sell your stock so you can pay him back. If you do not he will sell it and take the money he lent you. You sell it and your entire $6000 goes to the broker. This is an example of how bad a margin call can be to your account. To avoid this there are a few steps you can take to prevent them from happening. 1 Monitor your positions. Don’t let your losers fall from$60 to $30. Sell when the start to show weakness. 2 Use stop losses. If you set a stop at $55 you would have only lost $5. You would have never got a margin call. 3 Don’t buy on margin. If you want to just buy a stock and forget about it for 20 years maybe buying on margin Is not for you. After all you don’t want to get called out when it is at $30 only to watch it go up to $80. 
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