Margin Call and Stop Out in Forex, with Real Numbers
A margin call in forex warns that equity is close to used margin; a stop out closes trades. See both worked out on a $2,000 account, step by step.
A margin call rarely arrives out of nowhere. It is the end of a sequence that started when the position was opened too large for the account, and the numbers that lead to it can be worked out before you click buy.
Quick answer: A margin call in forex happens when your equity falls to the margin your open trades need, typically a margin level of 100%. You can no longer open new trades. If losses continue to the stop out level, often 50%, the broker closes your positions automatically at the market price. Levels vary by broker.
What a margin call in forex means
To follow a margin call you need four numbers, all shown at the bottom of a trading platform.
- Balance: the cash in the account, counting only closed trades.
- Equity: the balance plus or minus the running profit or loss on open trades. Swaps and commissions already charged are included.
- Used margin: the deposits your broker has set aside to keep your open positions running. Each position needs its own margin, based on its size and the leverage allowed.
- Free margin: equity minus used margin. It is what remains to absorb losses or to open new trades.
When you open a trade, used margin jumps up and free margin falls. As the trade moves against you, equity falls, and free margin falls with it, one dollar for every dollar lost. The used margin barely changes. A margin call is the moment free margin reaches zero: equity has fallen to the size of the deposits your trades need.
The name comes from the days when a broker’s dealer would telephone a client and ask for more money. Today it is an alert on the platform, an email or a change of colour on the account bar, and some brokers send nothing at all. While you are in margin call, the platform will not let you open new positions, because there is no free margin to put up. Your existing trades stay open. What happens next depends on the second threshold, the stop out.
The margin level formula, margin call and stop out levels
Brokers track your account with one percentage:
Margin level = equity ÷ used margin × 100
With $2,000 of equity and $1,466.67 of used margin, the margin level is 2,000 ÷ 1,466.67 × 100 = 136%. If you have no open trades there is no used margin, and the platform shows the margin level as blank or zero.
Two levels on that scale matter.
- Margin call level: the broker warns you and blocks new trades. 100% is a typical setting, which is the same as saying free margin has reached zero. Some brokers warn earlier, at 120% or 150%; others later.
- Stop out level: the broker starts closing your positions without asking. 50% is common, and it is the minimum required for retail clients of UK and EU regulated firms, where the rule is called the margin close-out. The UK’s Financial Conduct Authority requires firms to close positions once a retail client’s funds fall to 50% of the margin needed (FCA PS19/18).
These numbers vary. Brokers regulated outside the UK, the EU and Australia often set the stop out at 30% or 20%, and a few advertise 0%. A lower stop out does not make the account safer. It lets a losing trade run further before it is cut, so more of your deposit is gone when it finally closes. Find both levels in your broker’s account terms or contract specifications before you trade, and treat any numbers in this article as illustrative.
The main guide to what margin is in forex explains how required margin is calculated for each pair. Here the focus is on what happens to an account as it heads down the ladder.
Gold, indices and other CFDs fill the ladder faster
The margin level works the same way on every instrument in the account, but the margin rate does not. Under UK and EU retail rules, gold and major stock indices are capped at 20:1, so they need 5% of the position’s value as margin instead of 3.33%. Oil and other commodities are capped at 10:1, a 10% margin. These markets also tend to move further in a day than a major currency pair, measured as a share of their price.
Put together, that means a position in gold or an index uses more of your margin per dollar of exposure and moves faster against it. A trader who is used to EUR/USD and opens “the same size” in gold can find the account in margin call after a move that would barely register on a currency chart. Before trading anything new, work out what a $1 or one-point move is worth on your size, and how many of those moves your free margin covers. Our guide to what a CFD is lists the limits for each asset class.
A margin call example on a $2,000 account
Here is the full sequence for one trade. EUR/USD is at an illustrative 1.1000, and the account allows 1:30, the UK and EU retail limit for major pairs, which means a margin of 3.33% of the position’s value.
Here is the same trade at several prices. Equity falls $4 for every pip; used margin falls only slightly because it tracks the price.
| EUR/USD | Pips moved | Equity | Used margin | Margin level |
|---|---|---|---|---|
| 1.1000 | 0 | $2,000 | $1,467 | 136% |
| 1.0950 | −50 | $1,800 | $1,460 | 123% |
| 1.0900 | −100 | $1,600 | $1,453 | 110% |
| 1.0862 | −138 | $1,448 | $1,448 | 100%: margin call |
| 1.0800 | −200 | $1,200 | $1,440 | 83% |
| 1.0700 | −300 | $800 | $1,427 | 56% |
| 1.0678 | −322 | $712 | $1,424 | 50%: stop out |
You can run the same numbers for your own account with the site’s margin level calculator, which shows equity, free margin and how many pips price can travel before a margin call or stop out.
How a stop out closes your positions
At the stop out level, the broker’s system closes positions for you. The close is a market order, so it fills at the next available price: the bid for a long position, the ask for a short. In a calm market that will be very close to the 50% line. In a fast market, or when the market reopens after a weekend, it can be well beyond it, and the realised loss is bigger than the arithmetic in the example.
The simulator below shows the same effect on ordinary orders. Switch between a calm market and a news release and watch how far a market order can fill from the price you saw.
Illustrative. Market and stop orders fill at the next available price, which in fast markets can be several pips away. Limit orders fill at your price or better, or not at all.
Which position closes first
The stop out is measured across the whole account, not per trade. All your positions share one pool of equity, so a loss on one trade pulls down the margin level for all of them. When the threshold is hit, many brokers close the position with the largest loss first, then recheck the margin level. If it is back above the stop out level, the remaining trades stay open. If not, the next one goes. Some brokers close everything at once. The order is in your broker’s terms, and it is worth reading before you hold several trades.
The surviving trade is not safe. The account has already lost more than half its value, and the remaining position is now large relative to what is left. An account that survives a first stop out by a few dollars can lose the rest on the next ordinary move against the remaining trade.
When the account goes below zero
If price gaps far enough, the closing fill can leave equity below zero. Retail clients of UK and EU regulated firms have negative balance protection, so the broker writes the negative balance off. Elsewhere, the negative balance may be a debt. Either way, the protection starts at zero, after the deposit is gone.
How position size decides your distance to a margin call
Leverage sets how big a position you are allowed to open. Position size decides how close that position puts you to a margin call. On the same $2,000 account, EUR/USD at 1.1000 and 1:30, the distance to the 50% stop out shrinks fast as the size grows.
Notice what the 1:30 cap does and does not do. It stops this account opening more than about 0.54 lots of EUR/USD. It does nothing to stop you opening 0.50 lots, a position worth 27 times the account, which a 220-pip move will close out. EUR/USD has moved more than 220 pips in a single week many times. Leverage limits set the ceiling; your sizing decides where you live below it.
Try it with the slider. It starts at the same $2,000 account with 0.5 lots: move the leverage and watch the margin change, while the loss on a 50-pip move stays the same.
Margin locked up Loss from a 50-pip move against you
The loss on a 50-pip move does not depend on leverage at all. It depends only on lots. That is why our guide to leverage in forex argues that the useful question is how much you lose if your stop is hit, and the lesson on leverage and margin teaches it the same way.
What to do when a margin call arrives
If you are already in margin call, the decision is simpler than it feels. The account has told you that the open positions are larger than it can carry. You have three real choices, and only two of them are sound.
Close the position, or part of it. Closing half of the 0.40-lot trade from the example at 1.0862 would realise a loss of about $276 on that half, free about $724 of margin and lift the margin level from 100% to roughly 200%. The remaining 0.20 lots would then need to fall roughly another 370 pips before the next margin call. Reducing is a decision you make at a price you can see. A stop out makes the same decision for you, later, at a worse price.
Let your stop loss do its job. If the trade already has a stop that sits above the stop out level, and you placed it for a reason, you may choose to leave it. Check that it really is above the stop out price. In the example, a stop below 1.0678 would never be reached, because the broker would close the trade first.
Deposit more money. This is the option the warning seems to invite, and it is the one we suggest you avoid. New money does not change whether the trade idea was right. It only lets the same oversized position lose more before it is closed. If you want to keep the trade, keep a smaller version of it.
Whatever you choose, do not open a hedge in the opposite direction to “freeze” the loss. A hedge adds a second position, often needs margin of its own, pays swaps on both sides, and leaves you with two trades to close at the right moments instead of one.
After the event, write down what size you were trading, what your margin level was at the open, and where your stop was. A margin call is a sizing error that shows up later. The record in your trading journal is what stops it from happening twice.
How to avoid a margin call
Every way of staying clear of a margin call comes back to the same idea: a planned exit closes the trade long before the broker has to.
Size every trade from a stop loss. Decide where the trade is wrong, set a stop loss there, and choose the size so that a hit stop costs a fixed share of the account. We suggest 1% while you are learning. On the $2,000 account, a 40-pip stop and 1% risk ($20) gives $20 ÷ (40 × $10) = 0.05 lots. Used margin is $183, the margin level opens at about 1,090%, and the stop out would need a fall of roughly 3,900 pips, to about 0.71, below anything EUR/USD has traded at since the euro was launched in 1999. The stop closes the trade after a $20 loss. The position sizing and risk per trade lessons explain the method.
Place the stop on the chart, not at the stop out. A stop chosen from structure, explained in the stop-loss placement lesson, exits when the idea fails. The stop out exits when the money runs out.
Count all your positions together. Three trades on EUR/USD, GBP/USD and EUR/GBP can behave like one large trade on the dollar or the euro. The margin level is shared, so correlated positions reach a margin call together. Our guide to currency correlation shows how to check.
Keep a margin level floor of your own. If your margin level ever falls below, say, 500%, treat it as a sign that you are too large, whatever the broker’s settings say.
Be careful over weekends and news. A stop protects you only at the next available price. Gaps can jump past both your stop and the stop out level, as our guide to the forex weekend gap explains, and fills during news releases are covered in our guide to slippage.
Common margin call mistakes
Treating free margin as spare money
Free margin is the cushion that keeps your open trades alive. Using it to open another position thins that cushion for every trade at once.
Adding to a losing trade to “average down”
Buying more as price falls raises used margin and the loss per pip at the same time. It moves the margin call closer from both directions.
Depositing more to stop a stop out
A top-up can delay the close, but it turns a defined loss into an open-ended one. If the trade was wrong at 100%, new money rarely makes it right.
Not knowing your broker’s levels
A 100% call and 50% stop out are common, not universal. If your account stops out at 20%, the trade will run further, and the loss will be larger, before anything is closed for you.
Forgetting swaps and commissions
Overnight charges come out of equity. On an account sitting just above the stop out, a swap charge at the daily rollover can be what tips it over.
Frequently asked questions
What is a margin call in forex?
A margin call is the point where your equity has fallen to the margin your open trades require, typically a margin level of 100%. Free margin is zero, so you cannot open new trades. Nothing is closed yet. If losses continue to the stop out level, the broker closes positions automatically.
What is the difference between a margin call and a stop out?
A margin call is a warning; a stop out is an action. At the margin call level, often 100%, the broker alerts you and blocks new trades. At the stop out level, often 50%, it closes your positions at the market price, usually starting with the largest loss, until the margin level recovers.
How do you calculate margin level?
Divide equity by used margin and multiply by 100. With $1,600 of equity and $1,453 of used margin, the margin level is 1,600 ÷ 1,453 × 100 = 110%. Equity includes the running profit or loss on open trades, so the margin level changes with every tick.
What is a good margin level to keep?
There is no official target, but the higher the safer. A trade sized from a stop loss and 1% risk usually leaves the margin level in the high hundreds or thousands of per cent. If your margin level is anywhere near 100% to 200%, the position is too large for the account.
Can a stop out happen at a worse level than 50%?
Yes. The broker closes positions with market orders at the next available price. In fast markets, during news or when the market reopens after a weekend, that price can be well beyond the stop out level, so the account can end up lower than the threshold suggests, and in a large gap even below zero.
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