What Is Liquidation Margin?

Buying securities on margin allows a trader to acquire more shares than can be purchased on a cash-only basis. If the stock price goes up, earnings are often higher because an investor holds more shares. However, if the stock price falls, traders may lose more than their initial investment.

The liquidation margin is the value of all of the positions in a margin account, including cash deposits and the market value of its open long and short positions. If a trader allows their liquidation margin to become too low, they may be faced with margin calls from their brokers and the broker may liquidate those positions.