A margin call is the broker's notification that the margin level on an account has fallen below a set threshold, because open positions are losing money. It is a request to add funds or reduce exposure. If the margin level keeps falling, open positions are closed automatically at the stop-out level.
How the margin level is calculated
The platform recalculates one figure on every price tick:
Margin level = equity / used margin x 100%
Equity is the balance plus or minus the floating result of open positions. Used margin is the sum of the margin requirements of those positions, each derived from notional value divided by the applicable leverage ratio. Under the ESMA retail caps those ratios are 30:1 on major currency pairs, 20:1 on non-major pairs, major indices and gold, 10:1 on other commodities and non-major indices, 5:1 on individual equities and 2:1 on cryptocurrencies.
Used margin stays constant while the position is open. Equity does not. That is why the margin level falls as losses accumulate, without any change in position size.
Margin call and stop out, step by step
Take an account with a 2,000 USD balance and one open position requiring 500 USD of margin.
| Floating result | Equity | Margin level |
|---|---|---|
| 0 | 2,000 | 400% |
| -1,100 | 900 | 180% |
| -1,500 | 500 | 100% |
| -1,750 | 250 | 50% |
At 100% the equity exactly covers the margin the position requires; many brokers send the margin call notification at or above this point. At 50% the standardised close-out rule for retail CFD accounts applies: the provider closes positions to bring the account back above the threshold. The 50% close-out level is fixed by regulation for retail CFD accounts and does not vary between providers. The level at which the margin call notification is sent is set in the account terms and contract specifications and does differ, so it is read there, not assumed.
Two points follow from the table. The notification is not the loss — the loss happened first, and the notification reports it. And the close-out is automatic: it does not wait for a response.
Size the position before it is open. Work out the margin requirement and the distance a move would have to travel with the position size calculator.
Leverage, margin call and stop-loss are three different things
Traders routinely merge these, and they behave differently.
- Leverage is a ratio set before the trade. It determines how much margin a given exposure ties up. It is covered in the lesson on leverage in trading.
- A margin call is an account-level event triggered by the margin level, driven by every open position at once. It has no fixed price attached to it.
- A stop-loss order is a position-level instruction at a price the trader chooses in advance.
A margin call is therefore an outcome of how the whole account is loaded, not of a single instrument. It is a structural feature of trading on margin and can occur on any account with open positions, including hedged and short exposure. Negative balance protection limits retail losses to the account balance, but the balance itself remains at risk.
