Unfortunately, I can’t find the answer to a simple question online.
I bought 100 shares at $1 per share and leveraged 1:5. This means I paid $20 of my own money and borrowed $80 from my broker.
After that, the stock drops to $0.80, effectively wiping out my margin.
The question is: will my broker close my position automatically, or will this thing stay open, sucking free money out of my account if the price drops even further?
Thank you in advance!
DeepSeek gave me the answer (I just don’t know if it’s true, probably yes):
“Your broker may not immediately close your position because of the 40 in free cash, but if the stock price drops further, the 40 will be used to cover losses.
Once the $40 is exhausted, the broker will likely close your position automatically to prevent further losses.”
Personally, I think, this is wrong behavior. In ideal world, I’d prefer to lose my “bet” by default instead of letting it quietly suck off my money.
Thanks! In an ideal world, would you like to lose your “bet” by default or keep it funded by your free cash?
That’s what stop-losses are for. 
Thanks! You may think you are saying obvious things, but to me they make a lot of sense.
So it is always the trader’s responsibility, that is what he is given the tools for. Makes sense. Now I think having a default stop loss value equal to the margin is very convenient. Does any trading platform set it like this? Where would you want to have a default stop loss value in your trade?
As far as I know, every trading platform lets you set it wherever you want it, subject only to any limitations imposed by the broker (e.g. some may have a “minimum permitted distance,“ etc.).
I always put mine wherever I want to be taken out of the trade (because “it was a bad entry after all,” and there are always some) if the price reaches that point, and for me that’s always just below the previous swing-low by prices for a long position or just above the previous swing-high for a short one.
I can’t be of much help to you, here, Reginald, because you seem to be asking about stocks? (This is a forex-trading forum, you know?)
It’s unusual - with forex - for people to risk more than a very small percentage of their account on any individual trade. The idea of having a stop-loss value at “margin-call level” is very alien to me, but that might be just because I don’t know anything about trading stocks - sorry!
Most brokers will auto-liquidate your position once your margin requirement is breached to prevent a negative balance. But it depends on their margin policy—check with them directly. Always know your stop-out level before leveraging
I’ll try your technique next time, thanks! I was asking about margin trading in general, but thanks for giving me the context. By the way, I won $390 on USDCAD today. Unfortunately, only in paper trading, haha.
No, I meant to set the default stop loss value not at the margin call level, but right away at $80. Because that’s the first logical point to call it quits when the money you initially deposited has been burned (and not explicitly replenished yet to continue). I would offer this SL value to my customers by default if I were a trading platform.
Ohhh, that sounds kinda sneaky! 
Like, if you had $40 sitting there, you’d think it’s just yours, right? But nope, if your trade starts losing, the broker just slurps it up like a milkshake before closing your position! 
And yeah, I totally get what you’re saying—why not just cut the trade off when it hits zero instead of secretly draining your extra cash? That would be way more fair! But I guess brokers wanna make sure they get their money first… sneaky sneaky!
Thanks for understanging! 