Margin Call
A broker's demand for additional funds when account equity falls below required margin levels.
A margin call happens when equity drops below required margin and the broker demands more funds or closes positions. At 30:1, a 3.3% move against you consumes the whole position.
A margin call occurs when your account equity falls below the required margin level. The broker demands you deposit more funds or close positions. If ignored, the broker may automatically close (stop out) your positions to protect against further losses. Most brokers close positions automatically when margin is exhausted rather than asking for more money. The price level where that happens is set by the margin level formula, and the higher your leverage, the closer that level sits to your entry.
How It Works
- Margin level drops below threshold (e.g., 100%)
- Broker issues margin call warning
- Trader must add funds or close positions
- Stop out level (e.g., 50%) triggers automatic closures
Trading Tips
Set alerts before margin call levels
Use stop losses to prevent margin calls
Keep sufficient free margin as buffer
Margin Call Example
Say you open positions using 90% of your margin and the market drops 1% against you. Equity falls below the required level, the platform flashes a margin call, and minutes later it starts closing your trades automatically, worst first, at market prices.
How Traders Use Margin Call
Never meet a margin call with fresh deposits to save a losing position. The call is the market telling you the size was wrong. Close down to safety, and size the next trade so a call becomes mathematically unlikely.
Related Terms
Sources
- InvestopediaMargin call mechanics
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