What is a margin call?

Last updated: 26 September 2026

A margin call is the broker's 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, usually the biggest loser first, until margin level recovers.

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

Margin call vs stop-out

A margin call is a warning; the stop-out is the action. Between the two you still control what gets closed, and at what price.

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 to about 217 pips below entry: equity ~$458, margin level 50%. Broker auto-closes the position. You're left with roughly half your starting capital.

How to calculate a margin call

You can work out in advance how far price can move before each threshold:

pips to level = (equity − level × used margin) ÷ pip value of all open positions

In the example above, equity is $1,000, used margin $917 and the pip value $2.50 (0.25 lots × $10). The margin call at 100% is (1,000 − 917) ÷ 2.50 ≈ 33 pips away, at about 1.0967. The stop-out at 50% is (1,000 − 458) ÷ 2.50 ≈ 217 pips away, at about 1.0783. The formula holds used margin fixed; on EUR/USD in a dollar account the margin shrinks a little as the price falls, so the real distance is slightly longer.

If your stop loss sits closer than the margin-call distance, the stop closes the trade first. If it sits beyond the stop-out distance, the broker closes it for you before the stop is reached.

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 and prices can jump during major releases. A stop can fill well past its level, and the wider spread alone lowers the equity of every open position.
• 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.

What to do when you get a margin call

Take the example at 95% margin level: equity $875, used margin $917. Free margin is −$42, so the platform won't accept new trades, and adding to the position isn't possible anyway. The choices are:

• Close part of the position. Closing half realises half the loss but halves the used margin to $458; margin level goes to about 191%.
• Deposit. $500 more lifts equity to $1,375 and margin level to 150%. It also puts more money behind a trade that is already going wrong, so decide whether you'd open it again today.
• Close everything and take the loss at a price you chose, not at the stop-out.

Doing nothing leaves the decision to the stop-out level.

How to avoid it (the boring answer)

1. Size by risk percentage, not by margin. If you risk 1% of the account per trade, it takes about 69 losses in a row to halve it — 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.

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. Retail accounts in Australia have had the same protection since March 2021. Outside the EU/UK this is broker-by-broker — verify before you open an account.

Margin call levels by region

• EU (ESMA) and UK (FCA), retail: positions must be closed when margin level falls to 50%, and leverage on major pairs is capped at 30:1.
• Australia (ASIC), retail: the same 50% close-out and 30:1 cap since March 2021.
• Professional accounts, US brokers and offshore brokers: the margin call and stop-out levels are set by the broker and can be anywhere from 100% down to 0%. Check the client agreement before funding the account.

The margin call level itself is not regulated in the EU, UK or Australia; brokers pick it, usually between 80% and 120%.

Margin call FAQ

Is a margin call bad?

It is a warning, not a loss in itself. It tells you the position is too large for the equity behind it. Treated as a signal to cut size, it costs less than the stop-out that follows if you ignore it.

Do I owe money after a stop-out?

Retail accounts in the EU, UK and Australia can't go below zero, so no. Elsewhere, a gap past the stop-out can leave a negative balance you owe the broker.

What happens if free margin hits zero?

You can't open new trades. Free margin reaches zero when equity equals used margin, which is a 100% margin level, the usual margin call point.

Does higher leverage cause margin calls?

Not by itself. Leverage sets how much margin a position locks up, not how much it loses per pip. At 100:1 the example trade needs $275 instead of $917 and the stop-out sits about 345 pips away instead of 217, but each pip still costs $2.50. Margin calls come from positions that are too large for the account; high leverage only makes it possible to open them.

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.