All day trading markets have margin requirements which set the minimum amount of cash and/or securities that need to be deposited in a trading account in order to trade that market. A detailed description of margin, with examples of the margin requirements for different markets, is available in the margin glossary entry.
What is a Margin Call?
A margin call is when your day trading brokerage contacts you to inform you that the balance of your trading account has dropped below the margin requirements for one of your active trades. For example, if you have an active trade on the ZG (Gold) futures market, and your trading account goes below $4,455, your brokerage would contact you with a margin call.
Margin calls originally got their name because the brokerage would call the trader on the telephone. However, many day trading brokerages no longer make margin calls in the original sense. Instead of contacting the trader to inform them of the margin call, many brokerages will automatically exit the offending trade (and possibly other trades as well).
Margin Calls Should be Avoided
Professional traders should never experience margin calls. Margin calls are only received when a trade has lost so much money that the exchange wants more money as collateral to allow the trade to continue. A professional trader should be managing their trades well enough that they never allow a trade to become this much of a loser.
Margin calls are most often experienced by amateur buy and hold investors, because once they enter their trades (typically by buying a stock), they will hold the trade no matter what the market does (hence the name buy and hold investor). As many of these buy and hold trades become large losers, they often experience margin calls, and unfortunately many amateur investors will deposit more cash to cover the margin call.