What is Margin and a Margin Call?

When you trade forex or crypto with leverage, you do not need to put up the full value of the trade. Instead, your broker requires you to set aside a small fraction of the total trade size. This required amount is called Margin.

How Margin Works

Think of margin as a good-faith deposit. If you want to open a $100,000 position (one standard lot) in EUR/USD, and your broker offers 100:1 leverage, your required margin is just $1,000. The broker essentially lends you the remaining $99,000.

While this allows you to make larger profits from small price movements, it also amplifies your losses. If the market moves against you, those losses are deducted from your account balance.

What is a Margin Call?

A margin call occurs when your open trades are losing so much money that your account balance falls below the broker's required minimum (maintenance margin). It is a warning from your broker that you no longer have enough money to support your open positions.

When a margin call happens, you typically have two choices:

• Deposit more funds into your account immediately.
• Close some or all of your losing positions.

The Stop Out Level (Liquidation)

If you ignore a margin call and the market continues to move against you, your account will hit the "Stop Out Level". At this point, the broker will automatically close your positions (liquidate them) at the current market price to prevent your account from going into a negative balance.

How to Avoid Margin Calls

• Use appropriate position sizing (never risk more than 1-2% of your account on a single trade).
• Always use Stop Loss orders.
• Do not over-leverage your account.
• Keep extra funds in your account as a buffer against volatility.

You can use our Margin Calculator to see exactly how much margin is required for a trade before you open it.

Disclaimer: This article is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss.