Last Updated: 17 April 2022
We all know what the Grim Reaper is, that is, a death bringer to the soul of humans. According to McKenna, Grim Reaper usually appears as a skeletal figure with its famous scythe ready to reap many human souls. Grim Reaper itself symbolizes a death angel that usually emerges from many games (either from PlayStation or computer games such as The Sims series). From my perspective, explaining a margin call using Grim Reaper makes it easy to understand which you can see below this.
Margin Account
To know what a margin call is, we have to know first what is margin in a trading account. From what Chen (2022) wrote, a margin in a trading account is where a forex trader buys and sells a currency using their funds and the broker's money to open a position where this is called buying on margin. Dicks (2010, p. 23) also explained that in margin trading you are trying to open a position by borrowing money from a bank or a broker. In a nutshell, a margin trading account is a trading account that used leverage (borrowed money from the broker) to open a position.
Margin Call
Now we know what margin is in a trading account, let us delve into a margin call. Chen (2022) wrote that a margin call occurs when traders' money cannot meet the broker's requirement to open a position or the account is running low on funds because of losing trades and because of that brokers may notify traders to deposit a specific amount of money to make the account remain open or even close the trader's account without notifying traders.
Margin Call: The Grim Reaper Of Forex Traders
A margin call itself is similar to Grim Reaper because McKenna inspires me to write it where she wrote that the skeleton figures represent death, the robe is seen as religious figures, and last is the famous scythe is where agricultural practices are being used where is similar to pluck the soul of humans (or in this case the account of traders) using the scythe. This means that the Grim Reaper is the broker that can close your trading account if the value of the margin account does not meet the broker's requirement.
Conclusion
Simply, a margin call is where your margin trading account is running low on funds because a margin account requires you to have a specific amount of money in the account that meets the broker's requirement to open a trade position and to remain the account open as the margin trading account is the combination of traders' fund and the broker's fund. Thus, in the margin account, you can open a long and short position using borrowed funds from the broker. So, if you do not meet the broker's requirement regarding funds on the account then be prepared to get reaped by the scythe of the Grim Reaper, or in other words your trading account can be forced to close.
Written by Andre I.
References
Chen, James. 2022. Margin Call. Retrieved from Investopedia. (Accessed 8 April 2022): https://www.investopedia.com/terms/m/margincall.asp
Dicks, James. 2010. Forex Trading Secrets: Trading Strategies for the Forex Market. New York: McGraw Hill.
McKenna, Amy. Where Does the Concept of a “Grim Reaper” Come From?. Retrieved from Britannica. (Accessed 8 April 2022): https://www.britannica.com/story/where-does-the-concept-of-a-grim-reaper-come-from