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CMC Markets Margin Call

Posted in Trading Services, Submitted by Trading Critic on Wed, 2006-09-27 05:28.
Ever wondered what a Margin Call notice looks like? Here is an actual margin call from CMC Markets

Have you ever wondered what a Margin Call looks like? Here is an actual margin call notice from CMC Markets I had the benefit of receiving by email the other day. Why did I receive it? Well… I had recently withdrawn some money from my trading account, effectively taking some profits. Then a recent trade went against my position, so the account went into the red on the margin side because of the lack of funds.

If you don't know anything about CMC Markets, they are a market maker which means that for the financial products that they provide: namely derivatives of the CFD (Contracts For Difference) type, they derive their prices of their products from the market. They do this for markets like the Australian Stock Exchange (ASX), NYSE, NASDAQ and more. Because it is a derivative product, there are many terms and conditions that make this product work - too many to describe here. But here's an interesting thing to note: CFDs are legal in England and Australia among other places but illegal in USA. Go figure. (I think it has something to do with their options/derivatives markets)

If you do get a Margin Call from CMC Markets don't fret too much. They don't immediately do anything to your account. You just simply get continuous emails either on the hour or whenever the price of your portfolio/stock/share/forex trade or whatever dips against your position (either long or short) to negate your margin in your trading account. I do suspect however, once the debt, or the negative margin eats into the capital on hold they would definitely close off your trade in order to protect you and themselves from further losses. (However, don't take my word as gospel though - there is that inherent risk of the market crashing tomorrow - who really knows right?) The question in the back of my mind is that, what will happen if the market does crash, or the position your are holding does crash through your stop loss limit (if you had taken the time and spent some money to take a guaranteed stop loss (GSL) then you would be safe), and through the margin you hold in your trading account? What then? That's a pretty big risk if you think about it - it is a probable event, but in my opinion unlikely. (But of course, you must be prepared to take any of the consequences if you dare to trade the markets) CMC Markets are famous for their derivative product: CFD's

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