What is a Margin call?

A margin call happens when the value of the user’s margin drops below the required margin or margin maintenance requirement. In its very essence, a margin call is a form of a warning sent to a trader to note that the value of his/her holdings declines below the required amount. When traders receive a margin call, they need to deposit additional funds in their accounts or sell their holdings. If traders don’t perform the necessary action, their position will be liquidated automatically.

Margin call might occur when traders use leverage to open positions with cryptocurrencies. They take out a margin loan to open a larger position. Depending on their position, a margin call can appear when the asset’s price declines (long position) or when the price increases (short position).