maintenance margin
Maintenance margin is the minimum equity you must keep in a leveraged trading account, or your broker will demand more money or sell your position.
In plain English
There is a particular kind of danfo path where the conductor collects your fare at the start, but halfway through the trip he turns and says the money you paid is no longer enough because fuel has gone up. Pay more now, or step down at the next bus stop. That sinking feeling, the one where you thought you had settled everything and suddenly you have not, is exactly what a margin call feels like in the stock market.
When you borrow money from a stockbroker to buy shares, that is called trading on margin. The broker lets you put down part of the money, say ₦500,000, and lends you the rest to control a bigger position. But the broker does not lend forever without protection. There is a line, called the maintenance margin, below which your own equity in that account cannot fall. If the value of your shares drops and your equity slips under that line, the broker calls you. Pay in fresh money, or they sell some of your shares to bring things back in order, often without waiting for your blessing.
A Lagos investor trading shares on margin through a local brokerage might agree to keep at least 25 percent of the position's value as their own equity at all times. If the market turns and that cushion shrinks to 15 percent, the broker calls, and if the investor cannot top up quickly, shares get sold to cover the gap.
In London, the same idea runs through spread betting and CFD accounts, where a trader's positions are checked constantly, and a sharp move in a stock like a mining company can trigger a margin call within hours.
For someone abroad trying to grow money for family back home through a trading app, this is the calm danger of leverage. Borrowed money multiplies your wins, but it also multiplies how fast you can be asked to pay up when things go the other way.
You buy ₦2,000,000 worth of shares, putting in ₦800,000 of your own money and borrowing ₦1,200,000 from your broker. Maintenance margin is set at 25 percent, meaning your equity must never fall below ₦500,000. If the shares drop in value and your equity falls to ₦450,000, the broker issues a margin call, asking you to add funds immediately or have some shares sold.
Questions people ask
What happens if I ignore a margin call?
The broker will not wait indefinitely. If you do not add money or reduce your position within the given time, they will sell enough of your shares themselves to bring your account back above the maintenance margin, often at a price you would not have chosen yourself.
Is maintenance margin the same as the initial margin?
No. Initial margin is the amount you must put down to open the position in the first place. Maintenance margin is the lower amount you must keep at all times afterward. Initial margin gets you in the door, maintenance margin keeps you from being pushed out.
Can maintenance margin requirements change after I open a position?
Yes, brokers can raise maintenance margin requirements during volatile periods or for particular stocks they consider risky, even on positions you already hold. It is worth reading your broker's notices rather than assuming the rules from day one will stay fixed.
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