What Is a Margin Call in Trading? Definition, Causes, and Examples

Definition:
A Margin Call is a broker’s warning that a trader’s account equity has fallen below the required margin level, meaning they must deposit more funds or close positions to maintain trades.

Explanation:
When you trade with leverage, you must keep a minimum amount of equity in your account (called margin). If losses reduce your equity below the broker’s margin call level (often around 100% margin level), the broker issues a margin call.

At this stage:

• You may not be able to open new positions.
• The broker asks you to add funds or reduce exposure.
• If ignored, the account may reach Stop Out Level, where positions are automatically closed.

📊 Margin Call vs. Stop Out

• Margin Call: Warning stage – equity falls to a critical level (e.g., 100% margin level).
• Stop Out: Final stage – broker forcibly closes positions when equity falls further (e.g., 50% margin level).

📈 Example (Forex)

• Account Balance: $1,000
• Open positions require $500 margin
• Broker sets Margin Call Level at 100% → Equity must stay ≥ $500
• If floating losses bring equity to $500, you get a margin call.
• If equity drops further (e.g., to $250 with Stop Out Level at 50%), positions will be liquidated automatically.

🌍 Why Margin Call Matters

• Prevents traders from losing more than their account equity
• Protects brokers from client defaults
• Signals poor risk management if reached frequently

Related Terms: Margin, Leverage, Stop Out, Equity, Risk Management

Category:
Trading / Risk & Margin Management

✅ FastPip Tip:

Margin calls are a red flag—if you’re hitting them, your position sizes or leverage are too high. Use smaller trades and tighter risk control.

📣 Related Resources from FastPip

✅ Manage margin risk better with our Copy Trading Platform
✅ Get Forex Signals that use safe margin levels
✅ Read our Blog for strategies to avoid margin calls