A margin call is one of the most feared events in trading. It happens when your account can no longer support open positions because equity becomes too low. Whether you trade Forex, Gold, or Crypto, understanding margin call is essential to avoid blowing your account.
In this 2025 updated guide, you’ll learn exactly:
- What margin call is
- Why it happens
- How brokers calculate it
- How to avoid margin call forever
What Is Margin Call?
Margin call occurs when your equity falls below the broker’s required margin level. When this happens, the broker notifies you to add more funds or close your losing trades.
In simple terms:
Your account is too weak to support your open positions.
Key Terms You Must Understand
1. Balance
Your total money excluding floating profit/loss.
2. Equity
Your real-time account value including floating P/L.
3. Margin
The capital locked to keep a trade open.
4. Free Margin
Available funds to open new trades.
5. Margin Level
Margin Level = (Equity / Margin) × 100%
Brokers trigger margin call when margin level falls below a certain threshold (usually 100% or 80%).
Why Does Margin Call Happen?
Margin call happens when the market moves against your position and your equity drops too low.
The most common causes:
- Opening positions that are too large
- Trading without stop-loss
- Using extreme leverage irresponsibly
- Overtrading (too many positions at once)
- Entering trades during high volatility news
- Letting losses run instead of cutting them early
Margin Call Example
Let’s say:
- Account balance: $500
- Leverage: 1:500
- You open 0.20 lot XAUUSD
Margin used ≈ $96 If price moves strongly against you, equity might drop to $80.
Margin level = (80 / 96) × 100% ≈ 83%
Most brokers issue a margin call at:
- 100% — early warning
- 80% — forced to add more funds or close trade
Stop-Out Level (Important!)
Stop-out is more severe than margin call. When margin level reaches stop-out level (usually 50% or 20%), the broker starts closing your losing positions automatically.
This is how accounts get wiped instantly.
How to Avoid Margin Call (Forever)
1. Use Safe Lot Size
Never risk more than 1–2% per trade. Use the Lot Size Calculator for accuracy.
2. Always Use a Stop-Loss
SL protects your equity from catastrophic losses.
3. Don’t Overtrade
Opening many positions at once increases margin usage and destroys free margin.
4. Avoid Trading During Major News
- NFP
- CPI
- FOMC
- Interest rate decisions
Volatility can trigger margin call even if your analysis is correct.
5. Add Buffer to Your Capital
Always maintain at least 30–50% free margin to survive market fluctuations.
6. Choose a Reliable Broker
A good broker provides clear margin requirements and solid risk protection.
Pro Tips to Strengthen Your Account
- Don’t let losses run — cut early
- Trade only in strong trend direction
- Use risk-reward setups (RR 1:2 or 1:3)
- Scale in gradually instead of big entries
Final Thoughts
Margin call is not a punishment — it’s a system that protects your account from complete destruction. By understanding margin, leverage, and risk management, you can trade safely and confidently.
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