House Call

Understanding the Term 'House Call' in Trading

In the world of trading, you may come upon various terms and phrases. One notable term is the 'House Call'. A 'House Call' holds an essential importance in your journey of investment. Here, we will define it and understand why it matters.

Basic Definition of 'House Call'

Essentially, a 'House Call' is an alert. It's a notification from your brokerage firm when your account falls below the minimum amount required. Let's play out a scenario: You have bought some stocks on the margin basis, meaning you borrowed money from your broker to buy more shares than your cash can cover. If these shares' value decreases to a point where it falls below the minimum margin requirement, you get a 'House Call'.

The Importance of 'House Call'

Why does a 'House Call' matter, you might ask? There are multiple reasons. Firstly, when you receive this 'call', it indicates that it is time for you to either deposit more cash or sell some of the assets to meet the margin requirements. Ignoring the 'House Call' may lead your broker to sell some of your assets to satisfy the margin requirement. Furthermore, it also brings your attention to the fact that your investment is not performing well, which could invite you to re-assess it.

'House Call' and Losses

Remember, receiving a 'House Call' does not necessarily mean you have lost your money. In market fluctuations, the value of your asset can decrease, triggering your brokerage firm to alert you. However, it's an indication that your investment is risking more money than you had initially expected to.

Conclusion

In conclusion, 'House Call' is an essential term for traders to know. It is a reminder for traders to maintain their investment within the margin requirements. Moreover, it helps them make informed decisions on their assets. Remember, it is not a signal to panic, but an alert to take necessary action.