What is a margin call?

A margin call occurs when a broker notifies a trader that their account equity has fallen below the required maintenance margin. This situation arises typically when the value of the securities purchased on margin declines, leading to insufficient funds to cover potential losses. When a margin call is issued, the trader is required to either deposit additional funds into their trading account or liquidate some of their positions to bring the account back into compliance with margin requirements. Failure to meet a margin call can result in the forced sale of assets by the broker to cover the shortfall.