What Is a Margin Call?
Margin calls happen when your trading account no longer has enough available funds to maintain your open positions. This usually occurs when your losses exceed a certain threshold and your equity falls below the required margin level.
Your broker will ask you to deposit more funds or close some positions to reduce your exposure.
Understanding Margin Requirements
To trade with leverage, you’re required to deposit a portion of the total trade value – this is called initial margin. Your broker will also specify a maintenance margin – the minimum equity needed to keep your trade open.
If your account value drops below the maintenance margin, you’ll receive a margin call.
Example of a Margin Call
Let’s say you open a position worth $10,000 with 10:1 leverage, so you need $1,000 in your account. If the market moves against you and your account drops to $800, you’ll receive a margin call asking you to deposit more funds or reduce your position.
What Happens If You Ignore a Margin Call?
If you don’t act, your broker may automatically close one or more of your positions to prevent further losses. This is known as a forced liquidation.
Forced closure can happen without notice, especially in fast-moving markets, and may result in realised losses you can’t recover.
How to Avoid Margin Calls
- 🔍 Monitor your account regularly – especially during high volatility
- 📉 Use stop-loss orders to limit downside risk
- 💡 Trade with less leverage to reduce risk exposure
- 🛠 Keep a buffer above the required margin to absorb market fluctuations
Key Takeaways
- ✅ Margin calls occur when equity falls below required margin
- ✅ Brokers can close your trades automatically if ignored
- ✅ Good risk management can help avoid margin calls
- ✅ Always understand your margin usage and exposure
Interactive Tip 💡
Use a trading calculator to determine the margin requirements for your positions. Practise reducing position size or increasing account funds to see how margin level changes.