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Let’s say you want to go long on 1000 shares of mining giant Glencore, which are currently trading at 500 cents. This means that the full value of your position is $5000. However, because you’re trading on leverage, you only need to put up an initial deposit of 20%. Your margin deposit is therefore $1000 ($5000 x 20%).
You have $1000 in your account when you decide to place the trade, which is enough to cover your initial margin requirement. But if the money in your account falls, due to your loss-making position, you’d immediately be placed on margin call. This is because you don’t have any additional funds with which to cover your losses.
To keep your position open, you’d need to top up your account to get your balance above $1000. The amount of money you’d be required to deposit is your maintenance margin. If your balance fell to $980, for example, you’d need to add $20 to your account.
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