Milton Markets

What is a Margin Call?

A margin call is a broker's demand for you to add funds or close positions when your account equity falls below the required margin level, protecting both you and the broker from excessive losses.

Last updated: January 2025

Key Takeaways

  • A margin call occurs when your account equity falls below the required margin level
  • Most brokers set margin call levels at 100% and stop-out levels at 50%
  • Margin Level = (Equity ÷ Used Margin) × 100%
  • You can avoid margin calls by using proper position sizing and stop losses
  • Adding funds or closing losing positions can resolve an active margin call
  • Prevention is better than cure - never over-leverage your account

Understanding Margin Calls

The Margin Level Formula

Margin Level = (Account Equity ÷ Used Margin) × 100%

Equity = Balance + Floating P/L

Used Margin = Total margin locked in open positions

When your margin level drops to 100% or below, you'll receive a margin call. At 50% or below, automatic position closure (stop out) begins.

Margin Call Thresholds

Safe ZoneAbove 150%

Comfortable margin buffer, can open new trades

Warning Zone100-150%

Monitor closely, consider reducing positions

Margin Call50-100%

Cannot open new trades, add funds or close positions

Stop OutBelow 50%

Automatic position closure begins

Margin Call Scenario

You have $10,000 account, trading 3 lots EUR/USD at 1:100 leverage. The market moves against you.

1
Initial Balance:$10,000

Starting account balance

2
Position Size:3 lots (300,000 units)

High leverage position

3
Required Margin:$3,000

$300,000 ÷ 100 leverage

4
Market Loss:-$7,000

233 pips against you

5
Current Equity:$3,000

$10,000 - $7,000 loss

6
Margin Level:100%

($3,000 ÷ $3,000) × 100%

Status:MARGIN CALL

Must add funds or close positions immediately to avoid stop out

How to Respond to a Margin Call

  1. 1. Don't Panic: Assess the situation calmly
  2. 2. Check Margin Level: Determine how critical the situation is
  3. 3. Close Losing Positions: Start with the biggest losses
  4. 4. Add Funds (Optional): Only if you believe the market will reverse
  5. 5. Learn from It: Analyze what went wrong to prevent recurrence

Margin Call Prevention Strategies

Position Sizing

  • • Risk only 1-2% per trade
  • • Use position size calculator
  • • Account for correlation risk

Risk Management

  • • Always use stop losses
  • • Set daily loss limits
  • • Monitor margin level regularly

Leverage Control

  • • Use lower leverage (1:10-1:50)
  • • Keep free margin above 50%
  • • Reduce leverage in volatility

Account Management

  • • Maintain margin buffer
  • • Diversify positions
  • • Avoid overtrading

Risk Management Tools

Margin Calculator

Calculate required margin before trading

Position Size Calculator

Size positions to avoid margin calls

Risk-Reward Calculator

Plan trades with proper risk limits

Learn More

Understanding Leverage

How leverage affects margin

Risk Management Guide

Protect your trading capital

What is Margin?

Margin basics explained

Frequently Asked Questions

A margin call is triggered when your margin level drops below your broker's required threshold (usually 100%). This happens when losing trades reduce your account equity relative to the margin required to maintain open positions. Market volatility, over-leveraging, and lack of stop losses are common causes.

Major Forex Pairs Requiring Margin Management

EUR/USD
forex
USD/JPY
forex
GBP/USD
forex
AUD/USD
forex
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