Is margin variable according to price, and why? | Traders Hideout


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Is margin variable according to price, and why?

  #10 (permalink)

Salt Lake City, Utah
 
Trading Experience: Beginner
Platform: Jigsaw, NinjaTrader8
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I think the key thing to keep in mind is that the margin requirements are not necessarily set in stone or increased automatically. The broker or exchange can decide to increase or decrease the margin required on an instrument whenever they want.

This is what leads to things like that big run in Silver we had a few years ago. As the price went higher, the margins didn't increase. One contract was increasingly worth more and more increasing the leverage you had, and making it more attractive to trade. However, the exchange decided to increase the margins, and that meant some traders had to liquidate their position resulting in an ugly selloff.

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