What is a margin call in trading?

A margin call occurs when a trader's account equity falls below the required maintenance margin set by the broker. This situation typically arises during volatile market conditions or when a trader's positions experience significant losses. In essence, the margin call serves as a request for the trader to either deposit additional funds into their account or close out some positions to reduce the margin requirement. If the trader fails to respond to the margin call, the broker may liquidate positions to bring the account back into compliance. Maintaining sufficient margin is crucial in leveraged trading to avoid such scenarios.