What is a margin call?
Written by an ex-institutional trader. What a margin call is, shown with a diagram, what triggers it, what the stop-out level means, and the practical steps that keep you well away from one.
Direct answer
A margin call is a warning from your broker that your account equity has fallen close to the minimum margin needed to keep your open positions, because the trades have moved against you. It is the broker telling you that you are running out of the collateral that supports your leveraged positions, and that you need to add funds or reduce positions or the broker will start closing trades for you.
If the equity keeps falling, the broker reaches the stop-out level and automatically closes positions, worst first, to stop the account going negative. In Australia, ASIC requires retail brokers to provide negative balance protection, so you cannot lose more than your account balance. The way to avoid a margin call is not clever timing; it is using less leverage, sizing positions sensibly, and always trading with a stop loss.
What a margin call is
A margin call is a warning from your broker that your account equity has fallen close to the minimum margin needed to keep your open positions. When you trade with leverage, the broker holds part of your funds as collateral (the margin). If your trades move against you, those floating losses reduce your equity, and once it gets close to the margin in use, the broker calls.
It is, bluntly, the broker telling you that you are running low on the collateral supporting your positions, and that unless you add funds or cut exposure, it will start closing trades for you. A margin call is almost always a symptom of too much leverage and positions that are too large for the account.
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What triggers it
The trigger is the margin level falling too far. Margin level is your equity divided by the margin in use, as a percentage. As losing trades drag your equity down, the margin level drops, and at a set threshold (commonly 100 percent) the broker issues the margin call.
The further your positions move against you, the lower the equity, and the closer you get to the point where the broker stops waiting.
Margin call and stop-out
It helps to separate the two events:
- The margin call is the warning, typically at a margin level around 100 percent. It is your cue to act: add funds, or close some positions to reduce the margin in use and restore your buffer.
- The stop-out is the automatic action, typically at a margin level around 50 percent. If your equity keeps falling and you do not act, the broker closes positions for you, usually the biggest loser first, to stop the account going negative.
At stop-out you lose control of which trades close, which is the worst position to be in. The whole point of managing margin is to never get near the stop-out, because by then the decisions are being made for you, at the worst possible time.
How to avoid one
Avoiding a margin call is not about timing; it is about structure. The levers are all in your control:
- Use less leverage than the maximum. The ASIC cap is a ceiling, not a target. Trading well below it gives your account room to breathe.
- Size positions to your risk. Risk a small percentage per trade, set with the position size calculator, so no single trade can threaten your margin.
- Always use a stop loss. A stop loss caps each loss before it can eat into your margin buffer.
- Keep a cash buffer. Do not trade the account to the hilt. Free margin is what absorbs normal adverse moves.
Margin calls happen to over-leveraged, over-sized accounts. Trade smaller than you think you should, and you will rarely if ever see one. In Australia, ASIC-regulated brokers also provide negative balance protection, so even a violent stop-out cannot take you below zero. Build the rest of the foundation with margin, leverage and the drawdown calculator, and choose an ASIC broker from the best forex brokers in Australia ranking.
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Diagram is illustrative; broker thresholds vary. Last reviewed: 2026-06-01.
Frequently asked questions
What is a margin call in forex?
A margin call is a warning from your broker that your account equity has dropped close to the minimum margin required to hold your open positions. It happens when your trades move against you and the floating losses eat into your usable funds. The call is a signal that you must act, by adding funds or closing positions, before the broker does it for you. It is measured by the margin level, the ratio of your equity to the margin used, expressed as a percentage.
What happens when you get a margin call?
First you receive a warning, often when your margin level falls to around 100 percent, meaning your equity has dropped to roughly the amount of margin in use. If the losses continue and the margin level falls to the stop-out level, commonly 50 percent, the broker automatically closes your positions, usually starting with the largest loser, to prevent the account going further negative. You do not get to choose which trades close at stop-out; the broker does it to protect itself and you.
What is the difference between a margin call and a stop-out?
A margin call is the warning; a stop-out is the action. The margin call comes first, alerting you that your equity is getting low relative to the margin used, giving you a chance to add funds or reduce exposure. The stop-out is the lower threshold at which the broker stops waiting and automatically closes positions to prevent a negative balance. Think of the margin call as the alarm and the stop-out as the automatic shutdown if you ignore it.
How do I avoid a margin call?
Use less leverage than the maximum, size positions to risk only a small percentage of your account per trade, and always trade with a stop loss so losses are capped before they threaten your margin. Keeping a healthy cash buffer in the account rather than trading it to the hilt also helps, as does not running too many positions at once. A margin call is almost always the result of over-leverage and oversized positions, both of which are within your control.
Can I lose more than my deposit in a margin call?
In Australia, no. ASIC requires retail brokers to provide negative balance protection, which means your account cannot go below zero; you cannot lose more than your balance even if a stop-out happens in a fast-moving market. This is one of the key protections of trading with an ASIC-regulated broker. Without that protection, which is the case with some unregulated offshore brokers, an extreme move could in theory leave you owing the broker money.
What is margin level?
Margin level is the ratio of your account equity to the margin currently in use, expressed as a percentage: margin level = (equity / used margin) x 100. A high margin level means plenty of free margin and healthy headroom; a falling margin level means losses are eating into your buffer. Brokers trigger the margin call and the stop-out at set margin-level percentages, commonly 100 percent for the call and 50 percent for the stop-out, though the exact figures vary by broker.
