Forced Liquidation
| Forced liquidation is the involuntary closing of the leveraged position of a trader due to his/her failure to meet the essential margin requirements. This can happen when the value of the collateral falls below a certain level, or when the broker decides that the trader is no longer creditworthy. In either case, the trader is said to have "blown up" his account. Forced liquidation is a very serious matter, and can have devastating consequences for the trader involved. It is not uncommon for traders who have been forced to liquidate their positions to be unable to meet their margin requirements and be forced out of the market entirely. This can lead to financial ruin, and in some cases, suicide. If you are a trader, it is important to be aware of the risks of forced liquidation, and to take steps to avoid it. One way to do this is to maintain a healthy margin account, so that you will have the resources to meet any margin calls that may come your way. Another way to avoid forced liquidation is to use stop-loss orders, which can help to limit your losses in the event that the market moves against you. If you do find yourself in the position of being forced to liquidate your position, it is important to remember that it is not the end of the world. There are many successful traders who have been forced to liquidate their positions at one time or another, and who have gone on to rebuild their careers. With determination and hard work, you can do the same. |
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