Margin Call & Stop Outs
When trading on leverage, a trader borrows funds from the broker to be able to trade at higher points. Since the capital deposited to the account is used as collateral on which the loan is based, margin calls and stop outs are employed for better risk management strategies that limit the risk of receiving a negative account balance.
Margin call is the first indicator that informs the trader that the account margin level is reaching the minimum point. A stop out arises when the account balance reaches below the margin call, forcing the trading platform to automatically close down opened positions.
CMS Prime provides a flexible range of leverage ratios where investors can select to trade using 1:100 up to 1:500 leverage.
Traders who trade with a high leverage ratio can either benefit with high profits or either end up with a negative balance. Therefore, it is important that a trader fully understands the correct use of leverage and the risks involved when trading on margin.