Financial Analyst/ Guest author, RADEX MARKETS
Lee W. is a seasoned professional trader with over 10 years of experience. Passionate about sharing valuable expertise and unique market insights, Lee W. now serves as an external and independent market analyst for RADEX MARKETS.
PODÍL
A margin call is probably the one notification no leveraged trader wants to see. It means your trading account no longer has enough available equity to support your open positions, and if nothing changes, your broker may begin closing trades automatically to limit further losses. I've been here, and it's not a nice situation to be in.
A margin call is an early warning that your account is running out of breathing room. It isn't the same as having your positions closed immediately, but it's a clear signal that your margin level has fallen to a point where action is needed.
In this guide, we'll explain exactly what a margin call is, how margin levels work, what causes one, how to respond if you receive one, and five practical ways to reduce the chances of it happening in the first place.
A margin call is a notification from your broker telling you that the equity in your trading account has fallen below the required level to maintain your open positions. To restore the required margin, you'll usually need to deposit additional funds, reduce your position sizes, or close trades before your account reaches the stop-out level.
Ready to put your trading knowledge into practice?
A margin call is a warning from your broker that the equity in your trading account has fallen below the required level to support your open positions. Your trades are losing money, your available funds are shrinking, and your account no longer has enough margin to comfortably maintain those positions.
The term "margin call" simply means your broker is asking you to take action before losses increase further. Depending on the broker, you may need to deposit additional funds, reduce the size of your positions, or close trades to restore your account's margin level.
A margin call exists as an important risk-management safeguard. It helps protect both you and your broker from losses becoming larger than the available funds in your trading account. Rather than being a punishment, it's an early warning that your account is under increasing pressure.
It's also important to understand that a margin call isn't the same as a stop-out. Receiving a margin call doesn't automatically mean your trades will be closed immediately. Instead, it's your opportunity to take control of the situation before the broker is forced to step in and begin closing positions automatically if losses continue to grow.
This is why understanding how margin levels work is one of the most important parts of managing leveraged trades successfully.
Read more:What Is Margin in Forex Trading and How to Use It?
A margin call happens when your broker's Margin Level falls below a predetermined threshold. As the market moves against your open positions, your account equity falls, leaving less available margin to support your trades. Once your Margin Level drops to the broker's trigger point, you'll receive a margin call asking you to take action.
To understand why this happens, it's worth becoming familiar with three simple terms that every leveraged trader should know.
Core margin formulas
Equity = Balance + Floating Profit/Loss
Free Margin = Equity − Used Margin
Margin Level = (Equity ÷ Used Margin) × 100%
Term |
What it is |
Role in a Margin Call |
|---|---|---|
| Equity | The current value of your trading account, including unrealised profits and losses. | Falling equity is the main reason a margin level declines. |
| Used Margin | The amount of capital set aside by your broker to maintain open positions. | The more margin tied up in trades, the less flexibility your account has. |
| Free Margin | The remaining funds available after used margin has been deducted from equity. | Acts as your safety buffer against further market movements. |
| Margin Level | A percentage showing the relationship between equity and used margin. | Your broker monitors this figure to decide whether a margin call or stop-out is required. |
The process is actually quite straightforward:
Although the mechanics are the same across most trading platforms, the exact trigger level varies from broker to broker. Some may issue a margin call when your Margin Level reaches 100%, while others may use 80%, 70% or even 50%, depending on the account type and trading conditions.
The principle, however, never changes: once your account equity is no longer sufficient to comfortably support the margin required for your open positions, your broker will alert you that immediate action is needed.
Understanding these relationships is one of the biggest steps towards becoming a more disciplined trader. I regularly keep an eye on my Margin Level during volatile market sessions — not because I expect a margin call, but because I'd much rather spot potential problems before my broker has to.
Read more:What is leverage in forex and how much should you use?
A margin call and a stop-out are two different stages of your broker's risk-management process. A margin call is an early warning that your account is approaching a dangerous level of risk, while a stop-out is the point at which the broker begins closing your positions automatically to prevent further losses.
The important distinction is simple:
In most cases, receiving a margin call still gives you an opportunity to act. You can add more funds to your account, reduce the size of your open positions, or close trades yourself before the broker is forced to intervene.
Margin Level (Typical) |
What It Means |
What Usually Happens |
|---|---|---|
| Above ~200% | Your account has a healthy margin buffer. | Normal trading conditions with plenty of available margin. |
| ~100–200% | Your available margin is beginning to shrink. | Worth monitoring your positions more closely, particularly during volatile markets. |
| ~100% (Margin Call) | Your equity has fallen to the broker's warning threshold. | You may be asked to deposit funds, reduce exposure, or close positions to restore your margin level. |
| ~50% or 30% (Stop-Out) | Your account has reached the broker's minimum acceptable margin level. | The broker starts closing positions automatically, usually beginning with the largest losing trades. |
It's worth remembering that these figures are only typical examples. Every broker sets its own margin-call and stop-out thresholds, and they can also vary between account types and financial instruments. That's why it's essential to understand the specific levels that apply to your own trading account before you place leveraged trades.
Knowing where your warning level sits gives you valuable time to react before your broker has to make decisions on your behalf.
Let's put the theory into practice with a simple example.
Imagine you have a £2,500 trading account and open a EUR/USD position that requires £600 of used margin. At first, everything looks healthy. However, as the market moves against you, your floating losses begin to grow. Because those losses reduce your account equity, your Margin Level gradually falls.
The figures below are purely hypothetical, but they show how a margin call can develop.
Stage |
Equity |
Used Margin |
Free Margin |
Margin Level |
|---|---|---|---|---|
| Trade opens | £2,500 | £600 | £1,900 | 417% |
| Losses grow (−£1,200) | £1,300 | £600 | £700 | 217% |
| Margin call hit (−£1,900) | £600 | £600 | £0 | 100% |
At the start of the trade, your account has a comfortable margin buffer. Even if the market moves slightly against you, there's still plenty of equity available to absorb normal price fluctuations.
As losses increase to £1,200, your equity drops to £1,300. Although the position is under pressure, your Margin Level is still above 200%, meaning the account remains relatively healthy.
Once floating losses reach £1,900, however, your equity has fallen to £600 — exactly the amount of margin being used to support the position. The Margin Level is now 100%, which, for many brokers, is where a margin call may be triggered.
Whenever I see my Margin Level heading towards a broker's warning threshold, I don't wait for the platform to make decisions for me. I'd much rather add funds if it fits my trading plan, or reduce the size of the position before a stop-out becomes a possibility. Acting early almost always leaves you with more options than reacting after the broker steps in.
A margin call is usually the result of your account equity falling below your broker's required margin level. Although the forex market operates almost 24 hours a day and is generally one of the world's most liquid markets, prices can still move rapidly following major economic data, central bank announcements, shifts in market sentiment, or unexpected global events.
As losses increase, your account equity falls and your Margin Level declines. Once that Margin Level reaches your broker's margin-call threshold, you'll receive a warning that action is needed.
In reality, margin calls are rarely caused by a single event. More often, they're the result of several factors combining to put increasing pressure on your account.
Large adverse price moves are one of the most common reasons traders receive a margin call. When the market moves sharply against your position, floating losses increase quickly, reducing your account equity. Because your Margin Level is calculated using your equity, every additional loss pushes that percentage lower. This is especially important when trading with high leverage, as relatively small market movements can have a much larger impact on your account than many new traders expect.
High leverage allows traders to control larger positions using a relatively small amount of capital. While that can increase potential profits, it magnifies potential losses by exactly the same amount. The higher the leverage, the less room your account has to absorb adverse price movements before your Margin Level starts falling rapidly. A move that might be manageable on lower leverage could quickly trigger a margin call on a highly leveraged account.
Free Margin is the portion of your account that remains available after your broker has reserved margin for your open positions — think of it as your financial safety cushion. When Free Margin is low, your account has very little capacity to absorb further losses. Even a relatively modest market movement can reduce your equity enough to push your Margin Level towards the margin-call threshold.
Withdrawing money from your trading account while positions remain open can increase the likelihood of receiving a margin call. Every withdrawal reduces the amount of capital supporting your trades. If your open positions still require the same amount of used margin but your available equity has fallen, your Margin Level may decline more quickly if the market moves against you.
During periods of increased market volatility, major economic announcements, or exceptional market conditions, some brokers may temporarily increase their margin requirements. If that happens, the amount of margin needed to maintain your existing positions increases. Even if the size of your trade hasn't changed, your Margin Level can fall because more capital is now required to support it. That's why it's sensible to keep an eye on broker announcements around major events such as central bank interest rate decisions.
Markets don't always move smoothly from one price to the next. Around major news releases, geopolitical events, or when markets reopen after a weekend, prices can jump from one level to another without trading every price in between — this is known as a market gap. When gaps occur against your position, floating losses can increase almost instantly. In extreme cases, the market can move straight from a healthy Margin Level to a stop-out with very little warning.
Receiving a margin call doesn't necessarily mean your positions will be closed immediately. It does, however, mean your account's safety buffer has been significantly reduced. If the market continues moving against your trades, your account could soon reach the broker's stop-out level, where positions may be closed automatically.
The key is not to panic. Instead, assess your account quickly and decide on the most appropriate course of action based on your trading plan and risk tolerance.
Option |
What It Does |
Trade-Off |
|---|---|---|
| Add Funds | Increases your equity and raises your Margin Level, giving open positions more room to move. | Requires extra capital, and doesn't guarantee the market will reverse in your favour. |
| Close or Reduce Positions | Frees up used margin and reduces your exposure to further losses. | Locks in realised losses and may mean missing out if the market later recovers. |
| Combination of Both | Adds equity while reducing overall risk by trimming positions. | Requires careful judgement and sufficient funds, but often provides the greatest flexibility. |
Depositing extra money into your trading account immediately increases your equity and improves your Margin Level, creating a larger buffer between your account and the broker's stop-out threshold. That said, adding funds should only be considered if the original trade still fits your trading strategy. Throwing more money at a losing position simply because you don't want to close it is rarely a good long-term habit.
Reducing the size of your open trades lowers the amount of margin being used and can help improve your Margin Level. Sometimes the best trading decision is simply accepting a manageable loss before it becomes a much larger one. Closing part of a position may also reduce your overall exposure while still allowing you to participate if the market eventually turns in your favour.
In some situations, traders choose to both deposit additional funds and reduce part of their position size. This increases available equity while simultaneously lowering the amount of margin tied up in open trades. It can provide a healthier balance between preserving capital and maintaining market exposure — although every decision should still be based on a well-defined trading plan rather than emotion.
A margin call can never be ruled out completely, especially when trading leveraged products. However, sensible risk management and good margin planning can dramatically reduce the chances of receiving one. The goal isn't simply to avoid margin calls — it's to build a trading approach that gives your account enough room to handle normal market volatility.
Here are five practical ways to stay on the right side of your broker's margin requirements.
A cash buffer is simply extra capital that isn't tied up in open positions. It acts as a safety cushion, allowing your account to absorb normal market fluctuations without your Margin Level falling dangerously low. Many new traders use almost all of their available margin because they can. Experienced traders tend to do the opposite — they deliberately leave spare funds available so they're not constantly trading on the edge.
Position sizing means choosing the size of each trade based on your account balance, your acceptable level of risk and where your stop-loss is placed — not simply opening the same lot size every time. By keeping each trade proportionate to your overall capital, a single losing position is far less likely to have a significant impact on your equity or Margin Level. Many experienced traders choose to risk around 1–2% of their account on any single trade.
Read more:Long vs Short Position Compared: How to Trade Each Like a Pro
Lower leverage generally means lower margin-call risk. Although higher leverage lets you control larger positions with less capital, it also makes your account far more sensitive to relatively small market movements. I've always found it helps to think of leverage as a power tool: used carefully, it's incredibly useful; used carelessly, it can do a lot of damage surprisingly quickly.
A stop-loss order is one of the simplest tools for limiting trading risk. By automatically closing a position once it reaches a predetermined price, it helps prevent small losses from turning into much larger ones. No stop-loss can guarantee a perfect exit in every situation — during extreme volatility or market gaps, the execution price may differ from your stop price due to slippage — but sensible stop-losses remain one of the most effective ways to protect your account.
Successful traders don't just watch price charts; they also keep an eye on the health of their trading account. Regularly checking your Margin Level, Equity and Free Margin helps you spot potential problems before they become urgent. Personally, I treat my Margin Level like the fuel gauge in a car: you don't wait until the engine stops before looking for a petrol station, and the same logic applies to managing your trading capital.
Ignoring a margin call rarely makes the problem go away. If the market continues moving against your positions, your account can quickly reach the broker's stop-out level, where action is taken automatically. Understanding the potential consequences helps you appreciate why responding promptly matters so much.
The good news is that most margin calls are avoidable. By managing position sizes sensibly, using appropriate leverage and regularly monitoring your Margin Level, you can significantly reduce the chances of ever reaching the point where your broker has to intervene.
A margin call is a warning from your broker that the equity in your trading account has fallen too low to support your open positions. To restore the required margin, you'll usually need to add funds, reduce your positions, or close trades before your account reaches the stop-out level.
A margin call could occur when a trader with a £2,500 account opens a leveraged position requiring £600 of margin. If floating losses reduce the account equity to £600, the Margin Level falls to 100%, prompting the broker to issue a margin call and request action to restore the account.
Yes. If you don't respond to a margin call, your broker may begin closing your positions automatically. During volatile markets, this can happen quickly and may result in larger realised losses or less favourable exit prices.
If you're unable to add funds or reduce your positions, your account may eventually reach the broker's stop-out level. At that point, the broker will usually begin closing open trades automatically to limit further losses.
The answer depends on the type of trading. In traditional stock margin accounts, traders may sometimes have two to five business days to meet a margin call. In leveraged forex and CFD trading, however, a stop-out can follow almost immediately once the required margin level is breached, so it's best to treat a margin call as an urgent warning.
No. Margin Call is a 2011 financial drama inspired by events during the global financial crisis. This guide refers to the trading term margin call, which is the warning a broker issues when your account no longer has sufficient equity to support its open leveraged positions.
A margin call is your trading account's early warning that losses have reduced your available margin to a level where action is needed. While receiving one doesn't automatically mean your positions will be closed, it does mean your margin buffer has become dangerously thin, and delaying action could lead to a stop-out.
The best response is to act quickly — whether that's adding funds, reducing your exposure or closing positions yourself before the broker is forced to intervene. More importantly, aim to prevent margin calls altogether by maintaining a healthy cash buffer, using sensible position sizing, choosing appropriate leverage and protecting every trade with a well-planned stop-loss.
After more than 15 years of trading, one lesson has stayed with me: successful traders aren't the ones who never lose money — they're the ones who manage risk before it manages them. My best advice is to avoid a margin call altogether, but you learn from your mistakes, especially in trading. Being prepared for a margin call and knowing what to do is always worth it.
Lee W. is a seasoned professional trader with over 10 years of experience. Passionate about sharing valuable expertise and unique market insights, Lee W. now serves as an external and independent market analyst for RADEX MARKETS.
Reviewed by RADEX MARKETS
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