Liquidation Margin

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DEFINITION of 'Liquidation Margin'

Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds a long position, the liquidation margin is equal to what the investor or trader would retain if the position was closed. If an investor or trader has a short position, the liquidation margin is equal to what the investor or trader would owe to purchase the stock or other trading instrument.

INVESTOPEDIA EXPLAINS 'Liquidation Margin'

Liquidation margin applies to investors or traders who use margin (leverage) to increase the potential profit of a trade. When the equity of a margin account falls below the liquidation margin level requirement, the broker may automatically close any open positions in the account.

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