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Glossary
Trading

Margin call

Your broker demanding more money, at the worst possible moment.

If you have borrowed to invest and your collateral falls in value, the broker demands you top it up. If you cannot, they sell your positions for you, at the current price, whether or not you think it is a good one.

This is the mechanism that converts a temporary decline into a permanent loss, and it is why leverage is so dangerous to long-term investors specifically: it removes your ability to wait.

Figure

The loop that feeds itself

Price risesBroker demands collateralShort forced to buyBuying pushes price upsqueeze

None of this is a judgement about the company. It is a margin clerk executing a rule, and it stops the moment the forced buying runs out.

Why it matters

It is the moment at which volatility stops being noise and becomes an actual, realised loss.

The mistake everyone makes

Assuming you would be able to add funds in a crash. Crashes are precisely when everyone is short of cash.

Related terms

Leverage
Using borrowed money to increase the size of your position.
Short selling
Betting a price will fall, by selling shares you have borrowed.
Drawdown
The fall from a peak to the following trough. The pain, measured.

See Margin call on a real company

SteadyShares pulls this straight from the filings for 1,100+ companies, alongside moat scores, DCF fair value and peer comparison. Free to look around.

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