Few messages strike more fear into a trader than a margin call. It's the moment the market tells you your losses have gone too far — and if you don't act, your broker will act for you. Understanding it is essential before you ever trade on leverage.
Margin, quickly
To open a leveraged trade, you set aside a deposit called margin. It's not a fee; it's collateral that keeps your position open. As long as your account has enough equity to cover the margin your open trades require, everything runs normally. (For the full picture, see our leverage and margin guide.)
What a margin call is
A margin call happens when a losing position eats into your account equity so far that it drops below the level your broker requires to keep the trade open. At that point the broker demands one of two things:
- Add more funds to restore your margin, or
- Close some positions to reduce the margin required.
It's the broker's way of stopping your losses from exceeding what your account can cover.
What happens if you ignore it
If you don't respond, the broker doesn't wait. It will automatically close (liquidate) your positions — often at the worst possible moment, in a fast-moving market — to protect itself from you owing more than you have. This is called a stop-out.
Risk
A margin call is not a routine notification. It usually means you are one step away from having your trades force-closed at a loss you didn't choose. In extreme moves, you can even end up owing more than your deposit.
What triggers a margin call
Margin calls almost always come from the same root causes:
- Too much leverage — large positions relative to your account leave little cushion for normal price swings.
- No stop loss — without one, a losing trade keeps draining equity until the broker steps in.
- Too many open trades at once, each demanding margin and compounding the exposure.
- A sharp move against you, especially around news, when price can jump quickly.
How to avoid ever getting one
The good news: margin calls are almost entirely preventable with basic discipline.
- Use modest leverage. Just because high leverage is available doesn't mean you should use it.
- Always set a stop loss so a trade closes on your terms, long before a margin call.
- Risk only a small percentage of your account per trade (commonly 1%).
- Keep spare equity in the account rather than committing every dollar to margin.
- Watch your margin level — a falling level is a warning to reduce exposure, not to add more trades.
Warning
The traders who never see a margin call aren't lucky — they simply never let a single position grow large enough to threaten the account.
Trade with margin you understand
Clear margin requirements and transparent stop-out rules are basic protections a good broker provides. A regulated broker with a free demo lets you see how margin behaves before real money is at stake.
Pepperstone
Best for Copy Trading
Trading Forex and CFDs involves a significant risk of loss.
Educational content only, not financial advice. Trading forex carries a high level of risk and you can lose more than your deposit. Read our full affiliate disclosure.