When a margin call occurs, a trader's positions are liquidated or closed out. The goal is twofold: the trader no longer has the funds in their account to hold losing positions, and the broker is now liable for their losses, which is also bad for the broker. It is critical to understand that leverage trading may result in a trader owing the broker more than what was deposited in certain scenarios.

When a margin call occurs, it signifies that an investor's margin account has fallen below the required maintenance margin. This triggers a demand from the brokerage for the investor to either deposit more funds or liquidate assets to restore the account balance. The purpose of a margin call is to mitigate the risk of financial losses for both the investor and the brokerage.

Failure to meet the margin call within a specified timeframe may lead to forced liquidation of the investor's positions, often at unfavorable market prices. This can result in significant financial losses for the investor. Margin calls are typically issued when the value of the securities in the margin account declines, causing the equity to fall below a predetermined threshold. It underscores the importance of managing risk and maintaining sufficient funds to cover potential market fluctuations when engaging in margin trading. Investors should be vigilant and responsive to margin calls to avoid the potential consequences of forced liquidation.