Margin Calls are the Worst…so Avoid Them at All Costs

Yea there is nothing worse (when it comes to your trading account other than losing all your money) than waking up to an email or voicemail from your broker telling you that you are in a margin call.

How did this happen?

Well, it’s likely to be an overnight position that you held. You turned a day trade into a swing trade because you were down and you didn’t want to take the loss. (I speak from experience).

You actually did take your loss and now your account is below minimum requirements such as the PDT. Either way, you are required to either get rid of some of your position or add money to your account.

Our very simple, non-earth-shattering advice is to simply avoid putting yourself in a position to ever be in a margin call. If you are a day trader, you need to have stops in place, either hard stops or mental stops and get out of your positions when they are not going as you anticipated.

Minimizing losses is the key. If you are any other style of trader, like a swing trader, you should be watching your positions. You should have the bigger picture in mind on when you will take profits off the table, or cut the position. You don’t want to hold onto something forever (unless your cost basis is so low it’s mathematically impossible for the stock to hit that level).

For example, if you own Apple shares from 2001, by all means, keep them. But if you bought Tesla stock at all-time highs at 800, and now it’s at 700 and you are sitting on your hands, unless you have a lot of capital, and depending on your size, you could be facing a margin call if you haven’t already.

What is the worst that happens by avoiding them? You cut your losses. You save yourself the embarrassment, as well as the risk of your broker losing faith in you, or restricting your account. I believe it’s better to be low-key and not be bothered by any of that crap.

Your broker, your platform, and for that matter, your capital, are all tools that you leverage in order to make a living and generate profits.

If you are trading full-time like I am, you want this to be all seamless without headaches, or at least with as few as possible because this allows you to make a great living without worrying about commuting, a boss, asking for vacation time, etc.

Having no job equals freedom. Not trading your time for money is what you are after.

So don’t put yourself into a situation where you are getting a margin call and scrambling to figure out what to do or how to wire more funds into your account. It’s not cool and you certainly have control over making sure it never happens.