How to Meet a Margin Call with a Stop Order

Jump straight to the book, or…

This morning I received a “Margin Call” email from SpreadCo asking me to deposit additional funds in order to keep my open trades alive. Don’t be alarmed — this is a small account (so it’s not a big deal) in which I had pretty much invested 100% of my available trading funds; so the margin call wan’t at all unexpected.

It does give me an opportunity to discuss how such a margin call should be met, and the clue lies in what SpreadCo actually said, which was:

“Please deposit additional cleared funds or reduce your open positions to avoid liquidation.

In these cases, I think it’s almost always better to take the second piece of advice.. to reduce your exposure rather than depositing additional funds.

The trick is that you do not necessarily have to reduce your exposure by closing or part-closing any of your positions. On SpreadCo and other trading platforms you can very often reduce your exposure (and meet the margin call) by simply adjusting a stop order on a profitable position.

I noticed that my Talvivaara Mining position had move nicely into profit, so I simply lowered (because it was a short position) my guaranteed stop order level in order to reduce my risk and thereby meet the margin call.

Disclaimer: this posting is for general education only; it is not trading advice.