Glossary
Margin Call
A broker warning that your equity has fallen too low to support your open positions.
Margin Call, explained
A margin call occurs when losses erode your equity to the point where it no longer adequately covers the margin required for your open trades. The broker alerts you (and may restrict new orders) so you can add funds or reduce exposure.
Brokers express this as a margin-level percentage — equity divided by used margin. A margin call often triggers around 100%, meaning your equity has fallen to roughly the amount of margin in use, leaving no cushion.
If equity keeps falling and reaches the broker's stop-out level (commonly 50%, but it varies), positions are automatically closed — usually the largest losers first — to protect the account from going negative. This is forced liquidation at the worst possible time, locking in losses precisely when price is moving fastest against you.
Margin calls are almost always a symptom of over-leverage and absent risk management. Sizing positions to risk a small fixed percentage per trade means you rarely, if ever, come close to one. A trader risking 1% per trade with stops in place would need an extraordinary sequence of events to be margin-called.
On the desk the whole point of fixed-percentage sizing is that a margin call should be structurally impossible under normal conditions. If you ever see one, it is a sign that position sizing — not the market — has gone wrong.
Frequently asked questions
- What happens during a margin call?
- The broker warns you that equity is too low for your open positions and may block new orders. If equity keeps falling to the stop-out level, the broker automatically closes positions — usually the biggest losers — to prevent a negative balance.
- How do I avoid a margin call?
- Risk a small fixed percentage per trade, use stop losses, and keep plenty of free margin rather than opening maximum size. Proper position sizing makes margin calls effectively impossible under normal conditions.
Related terms
Margin
The deposit a broker holds as collateral to open and maintain a leveraged position.
ReadLeverage
Borrowed buying power that lets you control a large position with a small deposit — and that magnifies both gains and losses.
ReadEquity
Your account balance adjusted for the live profit or loss of all open positions.
ReadDrawdown
The peak-to-trough decline in your account — how far you fall from a high before making a new one.
Read
Put it into practice
Education modules
More terms in the glossary.
Vocabulary is the easy part. See how the desk turns these concepts into structured trades with defined risk on every position.