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Margin call

Also called: Stop-out · Margin level warning

Margin call — The point at which your equity has fallen far enough against your used margin that the broker warns you — and, a little further down, closes your positions for you.

A margin call is a warning and a stop-out is a liquidation, and the difference between the two is the difference between a bad week and a closed account. Both are decided by one ratio, and both thresholds are your broker’s choice rather than an industry standard.

In plain English

As a position moves against you, your equity falls while the margin reserved against it does not. The ratio between them is your margin level, and it drops. At a threshold your broker sets — often 100% — you receive a margin call: a notification that you should add funds or reduce exposure. At a lower threshold, often 50%, the broker begins closing positions itself.

The second event is not a request. It happens at whatever the market is doing at that moment, in an order the broker chooses, and it does not consult you. That is the mechanism people mean when they say an account was "blown".

The uncomfortable property is that it accelerates. Each position closed frees its margin, which raises the margin level, which may stop the cascade — or the remaining positions keep moving and the next one goes too. In a fast market the whole sequence can complete inside a minute, and the fills are wherever liquidity was, not where the level said.

The formula

Worked example — the demo account

Not something a statement records, so this is worked from stated inputs. A 10,000 USD account, one lot of EUR/USD at 1:100, so $1,085 of used margin.

On a single position, the margin call arrives only after roughly 89% of the account is gone. Leverage did not cause that — position size did.

This is the part worth sitting with. With one modest position, the margin mechanism is nowhere near the binding constraint: you would have to lose almost the entire account before it triggered. A trader who reaches a margin call on a single lot in a 10,000 account had a risk-management failure hundreds of pips earlier.

Margin calls become a live risk when several positions are open at once, particularly correlated ones. Four lots of correlated pairs reserve four times the margin and move together, so the margin level falls four times as fast — and correlation is exactly what makes a portfolio feel diversified while behaving as one trade.

Every figure above is from the demo account TapeSheet ships with — 96 closed trades, generated from a fixed seed. Open the same account →

What this does not tell you

The caveat is the part worth reading. Most tools put it in a footer, if they print it at all.

• A stop-out is not a stop-loss. A stop-loss is a level you chose in advance. A stop-out is the broker protecting itself, at market, in an order it decides. Reaching one means your own risk controls did not work.
• The thresholds are not standard. They differ between brokers, between account types at the same broker, and sometimes between instruments. The only authoritative source is your own terms of business.
• The level is not a floor in a gapping market. A weekend gap or a news gap can carry price straight past the stop-out level, and the fill lands wherever the market reopened. Whether that leaves you owing money depends on negative-balance protection, which is a separate policy and not universal.
• Nothing on a statement records it. A stop-out appears as ordinary closed trades. Reconstructing whether one happened means matching close times against a sudden cluster of closures — which is inference, not evidence.

Where TapeSheet shows it

Not computed, because a statement contains neither your margin requirement nor your equity through time. What TapeSheet can show is the pattern that precedes one: a cluster of positions closing within seconds of each other, visible on the trade list sorted by close time.

Questions

Related terms

• Margin — The portion of your balance reserved while a position is open — your own money, moved from free to used, and returned in full when you close.
• Leverage — The ratio between the size of a position and the margin it requires — a limit on what you may open, and not, by itself, a measure of risk.
• Maximum drawdown — The largest fall from a peak in your account to the lowest point that followed it, before a new peak was made.
• Balance vs equity — Balance counts only closed trades; equity adds the floating profit and loss on everything still open. The gap between them is what a statement cannot show you.

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