Is margin variable according to price, and why? | Traders Hideout - futures trading strategies, market news, trading charts and platforms

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Is margin variable according to price, and why?

  #10 (permalink)

Salt Lake City, Utah
Trading Experience: Beginner
Platform: Jigsaw, NinjaTrader8
Favorite Futures: ZB
Posts: 474 since Apr 2016
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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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