What is a margin call?
A margin call is your broker's warning that floating losses are close to consuming the collateral required to keep your positions open. If the decline continues past it, the broker starts force-closing your trades. That is liquidation.
It is not a request for a conversation. On most retail platforms it is an automated threshold, and the closures that follow happen without your involvement, at whatever price the market is showing at that moment.
How does a margin call actually happen?
Two numbers govern it: your equity (balance plus or minus open profit and loss) and your used margin (the collateral locked against open positions). The relationship between them is your margin level:
Brokers set two thresholds on that percentage. A margin call level, often around 100%, is the warning. A stop-out level, often 50%, is where they begin closing positions automatically.
Worked through with real numbers:
| Value | |
|---|---|
| Balance | $10,000 |
| Position | 1 lot EUR/USD, requiring $1,000 margin |
| Floating loss | −$9,000 |
| Equity | $1,000 |
| Margin level | ($1,000 ÷ $1,000) × 100 = 100% |
At that point the margin call triggers. If the loss deepens and equity falls to $500, the margin level hits 50% and the broker starts closing positions, usually the largest loser first, until the level recovers.
Note what did not happen: nobody phoned you, and the closure price was not your choice.
What causes margin calls?
This is the overwhelming cause. When a position is too large for the account, an ordinary market move produces an extraordinary percentage loss. The cause is almost never a wild market, it is a wild position size, which traces directly back to misusing leverage.
A stop closes the trade at a level you chose. A margin call closes it at a level the broker chose, after a much larger loss. Every margin call is a stop loss you declined to set, taken at a worse price.
Increasing a position that is already losing raises used margin while equity is falling. Both sides of the ratio move against you at once, which is why martingale-style approaches produce sudden, total losses rather than gradual ones.
Price can gap past your stop entirely, opening far from Friday's close. You are not filled at your stop, you are filled wherever the market reopens.
Positions held for weeks accrue overnight financing. It is small daily and meaningful eventually, and it quietly erodes equity while you are not watching.
How do you avoid a margin call entirely?
Three rules, and they are not complicated:
- Calculate size from risk, not from what is allowed. Decide the maximum a single trade may cost, place your stop where the idea is genuinely wrong, then size so those agree. Usually 1% to 2% of capital.
- Use a stop on every position, without exception. Choose your exit before the market chooses it for you.
- Cap total risk across open trades. Five positions each risking 2% is 10% at risk, not 2%, and correlated instruments move together. Gold and silver are not two independent bets.
Follow those and the margin level never approaches the threshold in normal conditions, because the losses that would take it there are closed long before.
Can you lose more than your deposit?
On a properly regulated retail account, usually not. Most regulated brokers provide negative balance protection, which means that if a violent move pushes your account below zero, the broker absorbs the difference rather than billing you for it.
That protection is not universal. It is standard under European and UK rules, and it is often absent at offshore brokers advertising very high leverage. In that case an extreme gap can leave you owing money, and people have received demands for more than they ever deposited.
Check two things before funding any account: whether negative balance protection applies, and who regulates the entity actually holding your money. This is one of the practical reasons regulation matters more than the spread on the marketing page.
What should you do if you get one?
Do not deposit more money to hold a losing position open. That is the instinctive response and it is usually the expensive one, because it commits fresh capital to defend a decision that is already failing.
Close positions to reduce exposure instead. Reducing size raises the margin level immediately and puts the decision back in your hands rather than the broker's. Then treat the event as information: a margin call is not bad luck, it is confirmation that position sizing was wrong, and the same sizing will produce the same outcome again.
Calculated sizing, mandatory stops and a daily risk cap are built into TIC's risk management systems, and results are published on Myfxbook. Maximum drawdown explains how to judge whether any strategy keeps losses within survivable limits.
trading carries high risk and you may lose your capital. Past performance does not guarantee future results. Educational content only, not investment advice.
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