Automatically closing out positions

  • This topic has 5 replies, 2 voices, and was last updated 2 weeks ago by James Barra.
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  • #179062 Reply
    Danny

      Right, so my broker has notified me they will start closing out my positions if I don’t deposit more cash? Is that legit? Can they do that?

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      • #179065 Reply
        James Barra
        Moderator
          DayTrading.com Team

          Hi Danny,

          Thank you for your message.

          Can you provide more details about the circumstances?

          Brokers can start closing out your positions in certain situations. For example, if you’re trading on margin, that is trading with borrowed funds, you normally have to maintain a minimum margin requirement that’s a percentage of the total value of your positions.

          If the markets move against you and the value of your securities falls, your account may drop below the margin requirement. At which point, your broker will issue a margin call asking you to deposit more funds to return to this level.

          If you don’t meet the margin call within the timeline your broker can close out your positions to meet the shortfall.

          Brokers should make clear any margin requirements when you open an account, and you should have been sufficiently alerted that this could happen.

          If you can provide more specific details about your situation it will help us in assisting you.

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        • #179334 Reply
          Tobias Robinson
          Moderator
            DayTrading.com Team

            Negative balance protection also influences the broker here. If an account balance goes into the red, the broker will take on the liability for the “loss”. They will therefore close the trade before this happens – the margin call is your ‘warning’ that this is likely to happen unless the account balance is increased (via new deposits or the trade reversing).

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          • #179381 Reply
            James Barra
            Moderator
              DayTrading.com Team

              Thanks Tobias. Helpful addition 👍

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            • #179524 Reply
              Danny

                Soz didn’t realised you guys had replied. Been speaking to my broker and understand it all now, they basically said similar to you guys. All sorted now and will be better prepared next time.

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              • #179614 Reply
                James Barra
                Moderator
                  DayTrading.com Team

                  Glad to hear it.

                  Best of luck Danny.

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