Margin call
Also called margin call level, margin warning, maintenance margin call
A margin call is your broker's warning that losses have cut your account equity down to a set percentage of the margin locked in your open trades (often 100%). You must add funds or reduce positions, or the broker may start closing them for you.
The warning itself costs nothing. What comes after it does: if your equity keeps falling to the stop-out level, the broker closes trades at whatever price is available. You can work out how many pips away both levels are before you open a trade.
The margin call formula: margin level in one line
A margin call is triggered by one number, the margin level.
- Margin level (%) = Equity ÷ Used margin × 100
- Equity = Balance + floating profit or loss
- Used margin = Position value ÷ Leverage
- Free margin = Equity − Used margin
Equity is what your account is worth right now, open trades included. Used margin is the deposit your broker locks while a trade is open. Free margin is the part of your equity that is not locked. Leverage is how much position each dollar of margin holds: leverage of 1:100 means $1 of margin holds $100 of position. The margin requirement is that deposit as a share of the position value, so 1:100 is a 1% requirement.
Your broker sets a margin call level. When your margin level falls to it, you get the warning and usually cannot open new trades. Lower down sits the stop-out level, where the broker starts closing positions for you, often the biggest loser first.
Rearrange the formula and you get the lines worth copying:
- Loss to margin call = Balance − (Used margin × Margin call level)
- Loss to stop-out = Balance − (Used margin × Stop-out level)
- Pips to margin call = Loss to margin call ÷ Pip value of your position
These lines assume a single position, no other open profit or loss, and a USD account trading a USD-quoted pair.
Worked margin call calculations for $500, $5,000 and $50,000
The figures here are an illustrative example with round numbers: leverage 1:100, a margin call level of 100%, a stop-out level of 50%, and EUR/USD at 1.0000, so one standard lot (100,000 units) is worth $100,000 and one pip is worth $10 per lot. Spread and overnight costs are ignored. Your broker's levels may differ.
$500 account, 0.20 lots. The position is worth 0.20 × $100,000 = $20,000, so used margin at 1:100 is $20,000 ÷ 100 = $200. Your margin level at open is $500 ÷ $200 × 100 = 250%.
The margin call comes when equity falls to $200 × 100% = $200. That is a loss of $500 − $200 = $300. Each pip is worth 0.20 × $10 = $2, so the margin call is $300 ÷ $2 = 150 pips away.
The stop-out works the same way: $500 − ($200 × 50%) = $400, and $400 ÷ $2 = 200 pips.
$5,000 account, 1 lot. Used margin is $1,000 and each pip is worth $10. The margin call is ($5,000 − $1,000) ÷ $10 = 400 pips away, and the stop-out ($5,000 − $500) ÷ $10 = 450 pips.
$50,000 account, 40 lots. Used margin is $40,000 and each pip is worth $400. The margin call is ($50,000 − $40,000) ÷ $400 = 25 pips away, and the stop-out ($50,000 − $20,000) ÷ $400 = 75 pips.
The largest account is the closest to a margin call. The distance depends on how much of your balance is locked as margin, not on how big the account is.
The chart below follows the $500 account as the trade moves against it. Used margin stays at $200 while equity falls towards it.
What to do before and after a margin call
Before you open the trade: compare pips to margin call with your stop-loss distance. If the margin call is closer than your stop, the broker's levels will end the trade before your plan does, so cut the lot size. This line gives the largest size that keeps the margin call beyond your stop:
- Largest lot size = Balance ÷ Money needed per lot
- Money needed per lot = Margin per lot × Margin call level + Stop-loss pips × Pip value per lot
Take a 200-pip stop on the $500 account. Margin per lot is $1,000, so $500 ÷ ($1,000 × 100% + 200 × $10) = $500 ÷ $3,000 = 0.166, rounded down to 0.16 lots. Check it against the earlier numbers: 0.20 lots gives only 150 pips, so it is too big, while 0.10 lots gives ($500 − $100) ÷ $1 = 400 pips. This is a ceiling set by margin, not a suggested size. The money you are willing to lose on the trade will usually call for less. The check below confirms that 0.16 lots keeps the margin call beyond the 200-pip stop.
With several trades open, add their used margin together first, and add their pip values together too.
After the warning: closing part of a position does not change your equity, because the loss was already counted in it. It does release margin. In the $500 example, with equity at $200 and used margin at $200, closing half leaves used margin at $100 and lifts the margin level to 200%.
Depositing money raises equity and has the same effect. Opening another trade to average down raises used margin and pushes the margin level lower.
The account summary of your trading platform lists balance, equity, used margin, free margin and margin level, and updates them with every price tick. You cannot set the margin call or stop-out level yourself. They are in your broker's account terms or contract specifications. What you control is leverage, lot size and the number of trades open at once.
Margin call mistakes that cost traders money
- Watching balance instead of equity. Balance does not move until you close a trade. The margin call is calculated on equity.
- Reading free margin as room to add trades. Each new position raises used margin, so the same loss now produces a lower margin level.
- Treating the warning as the last line of defence. In a fast market or over a weekend gap, price can jump past the margin call level and reach the stop-out with no time to react.
- Assuming every broker uses the same levels. Margin call and stop-out percentages vary by broker and account type, and margin requirements can be raised around major news.
- Forgetting the spread. A wider spread lowers equity on open trades even when the chart price has barely moved.
FAQ
Can I lose more than my deposit after a margin call?
Yes, if price gaps past the stop-out level before your trades are closed, the account can go negative. Some brokers reset a negative balance to zero and others do not, so check your account terms.
How does a margin call work in stock trading?
You borrow from the broker to buy shares and must keep a minimum share of equity in the account, called the maintenance margin. If falling prices take you below it, the broker asks for more cash or shares by a deadline. The broker is usually allowed to sell your holdings without waiting for that deadline or contacting you first.
What happens on a margin call in crypto trading?
Leveraged crypto positions are often liquidated automatically when margin runs short, with little or no warning period. Prices trade through the weekend, so it can happen while you are away from the screen.