A certain international commodity exchange recently announced an increase in margin requirements for metal contracts, which will take effect in the US market starting this week.

From the exchange's perspective, this is a routine risk management measure in response to market volatility and excessive concentration of speculative positions. The goal is straightforward—reduce leverage multiples to prevent systemic risk outbreaks.

Sounds reasonable, right? But in actual trading, margin adjustments often don't calm the situation like a fire extinguisher; instead, they can be the spark that ignites a powder keg.

What happens when margin is raised? What do traders experience? The logic is actually quite brutal.

Traders holding high-leverage long positions suddenly need to quickly top up their cash margin. If they can't keep up? The only result is forced liquidation. The problem is, forced liquidation isn't just "rational selling," but a frantic sell-off regardless of price.

And then? Selling pressure accumulates → prices plunge → more accounts are triggered for margin calls → more forced liquidations → prices continue to crash, trapping the market in a vicious cycle of "price decline - forced liquidation - sharper decline."

Why is the power of margin adjustments so significant? Because while exchanges don't directly intervene in prices, they control the rules for survival of funds. In high-leverage markets, prices can slowly rise, but deleveraging happens in seconds.

Especially in the precious metals market—where speculative funds are large and leverage is generally high. Once margin requirements are raised, the first to collapse are often not those who predicted the wrong direction, but traders who can't withstand the financial pressure. This is the brutal truth of high-leverage markets.