What Is a Margin Call? How to Avoid It
TBR Editorial Team
April 4, 2026
Nobody opens a trading account expecting to get a margin call. But they happen — more often than most brokers would like to admit. Understanding what triggers a margin call and how to prevent one is one of the most important things you can learn before risking real money.
Margin Basics
When you trade forex or CFDs, you don't need the full value of your position upfront. Instead, you put down a deposit — called margin — and your broker effectively lends you the rest. If you're trading with 1:30 leverage (standard in the EU for major pairs), a $30,000 position requires $1,000 in margin.
Your "used margin" is the total amount locked up as collateral for your open positions. Your "free margin" is whatever's left in your account after subtracting used margin and any unrealized losses. Free margin is what you have available to open new trades or absorb further losses.
The margin level — expressed as a percentage — is your equity divided by used margin, times 100. When this number drops too low, things start going sideways.
How Margin Calls Work
A margin call is your broker's way of saying: "You're running out of collateral." It happens when your account equity falls to or below the margin call level — typically 100% of used margin, though this varies by broker.
Here's a concrete example. You deposit $5,000. You open a EUR/USD position requiring $2,000 in margin. Your margin level is 250% ($5,000 ÷ $2,000 × 100). So far, so good.
The trade goes against you by $3,100. Your equity drops to $1,900. Your margin level is now 95% ($1,900 ÷ $2,000 × 100). If your broker's margin call level is 100%, you've just triggered one.
What happens next depends on the broker. Some send a warning email or push notification, giving you time to deposit more funds or close positions. Others — particularly those with aggressive stop-out policies — start closing your largest losing positions immediately.
The old image of a broker literally calling you on the phone is mostly history. Today, it's automated alerts and automatic position closure. The whole process can happen in seconds during volatile markets.
Margin Call vs. Stop Out
These two terms get confused constantly. They're related but different.
A margin call is a warning. Your margin level has dropped to a concerning point. You should take action — either add funds or reduce your exposure.
A stop out is the point where the broker starts forcibly closing your positions. This happens at a lower margin level than the margin call — often 20% to 50%. The broker closes positions starting with the largest loser until your margin level recovers above the stop-out threshold.
Example: A broker with a margin call at 100% and stop-out at 50%. At 100%, you get a warning. At 50%, they start closing positions whether you like it or not. The gap between these levels is your window to act.
Always check both levels for your broker. They're usually listed in the account terms or trading conditions. If a broker only lists one number, ask which it is.
How to Avoid Margin Calls
Use less leverage than your maximum. Just because your broker offers 1:30 doesn't mean you should use it. Many experienced traders use effective leverage of 1:5 or less. Lower leverage means more room for the market to move against you before your margin gets threatened.
Always use stop losses. A stop loss limits how much any single trade can cost you. Without one, a trade can keep draining your account until you hit margin call territory. Set your stop before entering the trade, and don't widen it if the market approaches it.
Don't risk too much per trade. The standard guideline is risking 1-2% of your account on any single trade. If you have $5,000, that's $50-$100 maximum loss per position. This keeps individual losers from threatening your overall margin.
Watch your total exposure. Multiple small positions can add up to one big exposure. If you're long EUR/USD, long GBP/USD, and short USD/JPY, you're essentially short the dollar three times. Those positions are correlated and will all move against you simultaneously if the dollar strengthens. Use a trading journal to track total exposure.
Monitor margin level during high-volatility events. NFP releases, central bank decisions, and unexpected geopolitical events can move the market fast enough to blow through your margin buffer. Either reduce position sizes before these events or close risky positions entirely.
Keep a cash buffer. Don't deploy 100% of your account as margin. Having unused capital sitting in your account acts as a cushion. Some traders maintain at least 50% of their account as free margin at all times.
Getting a margin call isn't the end of the world, but it's a clear signal that your risk management needs work. If it happens, take it as a learning opportunity rather than a reason to deposit more money and immediately try to win it back.
Frequently Asked Questions
What happens when you get a margin call?
When your account equity drops below the required margin level, your broker issues a margin call. Depending on the broker, you may receive a warning to deposit more funds, or your positions may be automatically closed (stopped out) to prevent further losses.
Can you owe money after a margin call?
In most cases with regulated brokers offering negative balance protection, your account cannot go below zero. However, some brokers and jurisdictions do not guarantee this protection, meaning you could theoretically owe more than your deposit in extreme market conditions.
What margin level triggers a margin call?
It varies by broker and regulator. Common margin call levels are 100% (equity equals used margin) and 50%. Stop-out levels — where positions are forcibly closed — are often set at 20-50%. Always check your broker's specific terms.