I’m new to Forex and just started working my way through babypips but I have a question that I can’t seem to find an answer to.
According to ibfx (not sure if url link is permissible here), margin level is defined as:
margin level = current equity in the account / current amount of margin in use
I’ve heard that brokers will make margin calls when margin levels are at 50%, sometimes 80%. I do not understand why this is the case.
I would think that as long as the equity in the account is equal to or greater than the amount required to open the position that the trade could be sustained.
I can see a margin call if a fluctuation of one pip would bring the equity below this amount but I do not see how a 50% margin affects this.
If someone could provide some example numbers perhaps it would help clear this one up for me.