What Is a Margin Call in Forex? Margin Call vs Stop Out

What triggers a margin call?

Brokers typically monitor your margin level:

margin level = equity ÷ used margin × 100%

Each broker sets a margin call level (a warning threshold) and a stop-out level (where forced closing starts), for example 100% and 50%. As losses reduce your equity, your margin level falls towards these thresholds. The exact calculation and thresholds depend on the broker’s systems and terms. See what is margin? for the definitions of equity and used margin.

A margin call, step by step

Worked example

Balance $2,000 on a USD account; broker margin call level 100%, stop-out level 50%. You buy 0.5 lots (50,000 units) of EUR/USD at 1.1000 with 30:1 leverage: used margin = 50,000 × 1.1000 ÷ 30 = $1,833.33. Each pip is worth $5 (half of the $10 pip value of a standard lot on a USD-quoted pair).

1. At entry: equity $2,000 → margin level about 109%.
2. Price falls 20 pips (−$100): equity $1,900 → margin level about 104%.
3. Price falls 40 pips (−$200): equity $1,800 → margin level about 98%, below the 100% margin call level. Depending on the broker, a warning may appear in the platform or be sent as a notification.
4. Price falls 200 pips (−$1,000): equity $1,000 → margin level about 55%.
5. Price falls about 217 pips (−$1,083): equity about $917 → margin level 50%. The stop-out threshold is reached and the broker starts closing the position; the actual closing price may differ in a fast market.

The position was worth about $55,000 on $2,000 of equity — an effective leverage of about 27.5:1 — so a 40-pip move against it was enough to reach the margin call level.

What happens after a margin call?

Once the margin call level is reached, several things can happen:

• The market recovers: equity rises again and the margin level moves back above the threshold.
• You deposit funds: equity increases, raising the margin level.
• You close or reduce positions: used margin falls, raising the margin level.
• Losses continue: the margin level falls to the stop-out level and the broker begins forced liquidation — closing positions automatically, in the order set by its liquidation policy, until the margin level recovers or no positions remain.

Margin call vs stop out

	Margin call	Stop out
What it is	A warning threshold	Forced closing (forced liquidation) of positions
Typical trigger	Margin level reaches the broker’s margin call level	Margin level reaches or breaches the broker’s stop-out level
What happens	A notification or platform warning may be issued; you can deposit funds or reduce positions	The broker begins forcibly closing positions; you may still manage any positions that remain open

Regulatory protections for retail clients

Rules for retail CFD and forex clients in the EU and UK require brokers to:

• close out one or more positions when account equity falls to 50% of the total required margin for open positions, and
• provide negative balance protection, so a retail client cannot be required to pay more than the funds in their CFD trading account.

In the EU these measures have applied since 1 August 2018, first as temporary ESMA measures and later as permanent national rules. In the UK, the FCA’s permanent rules have applied since 1 August 2019. They apply to retail clients, not to clients classified as professional.

Outside these regions, rules vary by country, product and broker. For off-exchange retail forex in the US, the CFTC warns that customers may be liable for losses beyond their initial deposit.

Ways to reduce the risk of margin calls

• Trade smaller. Size positions from your risk per trade, not your available margin — use the position size calculator.
• Use stop losses so a single trade cannot drain the account.
• Do not add to losing positions to “average down”.
• Watch news and weekends: price gaps can cause positions — including stop-out closures — to be executed at worse prices than expected.
• Know your broker’s levels — margin call and stop-out percentages differ between brokers.