What is a margin call?

Last updated: 4 May 2026

A margin call is the broker's polite-then-not-so-polite warning that your account no longer has enough equity to support the positions it currently holds. If equity keeps falling, the broker will force-close some or all of your trades to protect itself from your account going negative. The forced-close event is sometimes called a stop-out.

The two numbers that matter

• Used margin: the deposit currently locked up to back your open positions.
• Equity: account balance + unrealized P&L of open positions.

Brokers track margin level, defined as equity / used margin × 100%. Two thresholds are usually set:

• Margin call at ~100% margin level — broker emails / pops a warning that you can't open new trades.
• Stop-out at 50% margin level (EU/UK retail rule under ESMA) — broker starts auto-closing positions, biggest loser first, until margin level recovers.

US, offshore, and pro accounts can have different thresholds, but the mechanic is identical.

Worked example

Account balance: $1,000. Leverage: 30:1. You buy 0.3 standard lots of EUR/USD at 1.10000 (notional $33,000).

• Used margin = 33,000 / 30 = $1,100. You can't take this trade at 0.3 lots — let's say you take 0.25 lots instead, used margin = 27,500/30 ≈ $917. Free margin: $83.
• EUR/USD drops 30 pips. Loss: 0.25 × 10 × 30 = $75. Equity: $925. Margin level: 925/917 = 100.9%. You're at margin call.
• Drops another 20 pips. Loss: $50 more. Equity: $875. Margin level: 875/917 ≈ 95%. Still in margin-call territory.
• Drops another 40 pips. Loss: $100. Equity: $775. Margin level: 775/917 ≈ 84%. Approaching stop-out.
• Drops further to ~458 equity (margin level 50%). Broker auto-closes the position. You're left with roughly half your starting capital.

Why this happens to nearly every new trader once

The mechanic is so simple it seems impossible to fall victim to it. The reason it happens anyway:

• Position sizing by leverage instead of risk. “I'll take the biggest position my margin allows” is the textbook setup for a stop-out on the first adverse move.
• Adding to losers. Doubling down increases used margin while losing equity — margin level collapses fast.
• Holding through news. Spreads widen 5–10× during major releases; even a tight stop can become a 30 pip stop, and your margin level drops correspondingly.
• Multiple correlated positions. Long EUR/USD, GBP/USD, AUD/USD looks like three trades but is essentially one short-USD bet. They all move against you together.

How to avoid it (the boring answer)

1. Size by risk percentage, not by margin. If you risk 1% of equity per trade, a 50-trade losing streak is needed to halve the account — and you'd have stopped trading long before.
2. Use stops. A hard stop at the right level locks in the loss before margin level deteriorates.
3. Cap simultaneous correlated exposure. Don't run three USD-short pairs at once unless you've sized as if it's one position.
4. Watch margin level, not free margin. Free margin can be misleading if used margin is large. Margin level is the early-warning indicator.

EU's negative balance protection

One thing that has improved for retail traders since 2018: under ESMA rules, EU/UK brokers cannot let your account go negative. Even if a violent gap (e.g. CHF 2015) blows past the stop-out, the broker absorbs the residual loss. Outside the EU/UK this is broker-by-broker — verify before you open an account.

Related calculators

• Margin Calculator — exact margin required for any position and leverage.
• Position Size Calculator — sizes trades by risk %, not by margin available.
• What is leverage? — the upstream concept that makes margin calls possible.