Minimum margin is the lowest balance a trader may have in a margin account according to federal regulations.
How it works (Example):
When a trader engages in trading on margin, the margin account must contain at least $2,000 to satisfy regulations set by the Federal Reserve. This amount is called the minimum margin, and individual brokerage houses may raise it at their discretion.
Why it Matters:
If the balance of a trader's margin account dips below the minimum margin, it results in a margin call whereby the trader must increase the balance or sustain heavy penalties.
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