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What is a Margin Call? - YouTube
Channel: ClayTrader
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what is a margin call I'm clay let me
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explain first off a margin call is not
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good I'm racking my brain right now and
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I can't think of one situation where a
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margin call would be a positive thing I
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suppose that might not be right but
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about 95 percent sure that a margin call
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is not anything that could be good but
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perhaps I'm missing out on something but
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what exactly is a market call
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well first off understand that margin is
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another word for a loan I'll put a link
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to a video below where I talk more about
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a margin account but that's where this
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is all coming from so you can't have a
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margin call unless you have a margin
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account again I'll put the link down
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below and you can watch that video on
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what is a margin account but from a top
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kind of big perspective just when you
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see margin actually I'll do that right
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now just picture margin and Salone
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because that's what it is
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so a margin call is the situation where
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basically the loan has spun out of
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control
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and that your broker you know the person
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who has made the loan to you is saying
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no hey things are out of control we're
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in the business of making money we want
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to make money in order to make money we
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need to protect ourselves and protect
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themselves by not allowing risk to get
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too far out of control which is well
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what I want to show here so what do I
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mean by out of control and all that sort
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of stuff well let's just look at this
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right here and we'll just call this a
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trade and we have the start and then we
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have you know we'll just call it well
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technically not the end but it's just
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some place in the future so just you
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know this is just time and time is going
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like this now the big pitfall with this
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it can happen in either situation but
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usually when people go short meaning
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people think that a stock is gonna go
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down and you can make money when prices
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go down again I'll put a link down to a
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video below where I talk about what is
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shorting but again from a top-down just
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kind of general perspective shorting
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means going short
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means that you make money from prices
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going down in value if this is the first
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time you've heard you like it wait wait
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you can make money when prices go down
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yeah it's bizarre but it's totally
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possible so that's what shorten is so
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this is where a lot of people are gonna
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get margin calls and that you know this
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is the most typical area where you would
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see it so in other words at the start
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and just make these numbers up let's say
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that somebody goes short meaning they
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think the price is going to go down and
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they go short when the price is at $75
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meaning they want to see the price go to
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70 65 60 that's how they're gonna make
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money but at this point and this is all
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different all brokers have different
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kind of margin requirements as it's
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called but the point being a broker
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needs to protect themselves because they
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are giving a loan to do all this the way
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it works and if you stop and think about
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it how high can a price go well if
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theoretically you can go in and Finity
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right something can keep going up and up
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and up and up and up and up forever and
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when you go short you actually lose
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money when prices go up right because if
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you make money when prices go down then
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the opposite would be true you lose
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money when prices go up so when you stop
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and know that the fact that while prices
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can go up forever
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then that means theoretically losses can
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be infinite and that is exactly why a
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broker really needs to protect
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themselves because they understand that
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theoretically speaking they could lose
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like everything and then everything
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again because if a price just goes up
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and up and up so it's a it's a risky
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situation but it's not risky because
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that is why again a broker has margin
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requirements and margin controls and
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they have all these you know parameters
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set up before you go in and when I say
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go in before you you establish a trade
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so again hopping back into this and soon
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is that you get short then like set
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based on all these other variables I'm
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not going to get into the point is that
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the broker is gonna have some sort of
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and yellow being used for caution but
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some sort of we'll call it caution point
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out there
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we're let's just say that the price
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continues to move and move so in other
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words the price is going up it's doing
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the exact opposite of what this person
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thought it was going to do and now all
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the sudden and I'm just making this up
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let's say that based on all these other
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variables that am I gonna get into at
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$90 they're gonna reach out and say hey
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you're at risk of a marching call you
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need to either put more money in or you
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need to get out but you need to start to
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take action because our your risk is
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getting high and they care about your
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risk because well it could potentially
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be where your risk bleeds into them
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starting to lose money
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and remember brokers are for-profit
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business so they don't want that so
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they're gonna give you a heads up and
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say hey hey things are getting out of
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control you need to put in more money
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you need to put more money in your
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account sometimes they'll give you a
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couple other choices but pretty much
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they are trying to give you a heads up
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they're cautioning you this this this
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loan is starting to get out of control
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you need to do something so you can have
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a choice there but I mean you don't
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necessarily have to do anything but
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there is an area where they're gonna
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give themselves the greenlight and
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they're gonna go they're gonna go with
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what well they're gonna go with the
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margin haul and this is where - let's
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just say and they know this amount based
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on all the computers and algorithms and
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all that sort of stuff they know that if
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the price goes up to 105 they are gonna
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go with the margin call so what does go
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with the margin call means they sell
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your position they force you to take the
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loss and wait that's my that's my money
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that's my trade that's my position no
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it's not no it's not
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did you don't forget about that word
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they have given you a loan so they can
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they have every right to be like fine if
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you're not going to be disciplined if
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you're not going to you know do what we
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caution you to do then we will take
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matters into our own hand and we are
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going to sell the position we are going
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to end the trade for you so this right
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here also why I don't want to quite say
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this is the end of the trade because at
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this point is actually where the trade
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ends the difference being you as a
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trader did not end the position your
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broker did because they issued that
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margin call against you so that is what
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a margin call is a margin call
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Bin's when things spin out of control
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and you allow them to spin out of
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control and that's why I said I can't
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think of an instance where this would be
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a good thing I've never had a margin
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call I don't say that I don't think most
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people have will never experience this
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but I've had talked with people on my
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podcast that I offer that have had
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margin calls where the the positions
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liquidate and it's not a good situation
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so that is how it works at the core you
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are taking a loan and a margin account
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especially when you go short if you if
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your loan gets starts to get a little on
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thin ice you're gonna get warned but if
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things continue to spin out of control
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in regards to that loan because your
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broker is in the business to make money
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and they are threatening or they're
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threatened to actually lose money on the
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loan well that's where they're just
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gonna March and call it and end the
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position to protect themselves and it
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doesn't really protect you because by
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the time the margin call happens your
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account is essentially blown up anyways
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I suppose you come out with a little bit
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of money left over sometimes you might
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actually oh a little bit of money to
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your broker but yeah a margin call is
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designed to flat-out protect your broker
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not really designed to protect you
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because by the time it reaches the broke
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at this stage that could be to protect
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you although it's probably already
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pretty painful at that point anyways but
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if it were to ever get to a margin call
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yeah your account would probably pretty
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destroyed but it all circles back to
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this is why in training you have to have
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rules you have to have discipline you
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have to have a true-life system in place
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in order to protect from these sorts of
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things happening but as far as if you've
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heard anybody saying oh yeah I got a
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margin caller I was almost gonna get a
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margin call these are the things and
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this is what they're referring to first
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off thanks so much for watching the
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entire video real quick before you go I
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want to invite you to a live webinar web
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class training workshop online event
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whatever you want to call it but it will
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be me live revealing to you what I
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discovered that has allowed me to
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transform myself from being an employee
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to being my own boss
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including how I had only one losing day
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out of 73 days in total I'm going to
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cover three keys that have helped me
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unlock profitable consistency within the
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markets the first key is super-weird but
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in
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productive type of way the second key is
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super awesome because it quite literally
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is wired into our DNA as humans making
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it very easy to use but in a cruel way
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this becomes a pitfall for many traders
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I'll explain it although including how
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to avoid the pitfall that it creates for
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some and yeah the third key when you
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hear it sounds way to get way too good
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to be true but it's not and I'll show
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you how it all works then at the end I
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open it up for a question-and-answer
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session that is again totally live even
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if you can't make the live session
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please still sign up as it will be
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recorded and you can go back and watch
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the replay then I will send you click
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the image on the screen or click the
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link down in the description box so you
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can get the date and time and claim your
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spot which I should know is limited due
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to the fact that this truly is a live
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event if you have any questions let me
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know if not I'll be seeing you soon
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