A margin call happens when your account equity falls below the minimum level required to keep your open positions running. When you are trading on margin, you are essentially using leverage to control a position larger than your initial deposit, which amplifies both potential gains and potential losses. If the market moves against you far enough, your broker will issue a margin call, asking you to add funds or reduce your exposure.
It is one of the more important financial concepts to understand before you begin trading, as it directly affects how you manage risk day to day. Learn everything you need to know about margin calls from this article & start trading with FxPro!
What is the margin call triggered by?
Several factors can push your account to the point where a margin call is issued. The most common ones are:
- Excessive leverage: Using too much leverage relative to your account size leaves very little room for the market to move against you before your free margin is exhausted.
- Market volatility: Sudden and sharp price movements can erode your equity faster than expected, particularly if you are holding multiple open positions.
- Insufficient deposit: Not keeping an adequate amount of free margin in your account means you have no buffer when a trade moves the wrong way.
- Failure to manage risk: Ignoring stop losses or holding losing positions too long can fully deplete your usable margin.
- Margin requirement changes: Brokers can adjust their margin requirements.
Types of margin calls in financial markets
Not all margin calls are the same. In stock trading, investors may encounter a Fed call related to U.S. Regulation T, while futures traders may receive an exchange call based on exchange margin requirements. In retail forex and CFD trading, the term margin call is used.
- Standard margin call: Issued when your account equity drops below the maintenance margin level, prompting you to fund your account or reduce exposure.
- Fed call: Triggered when a trader fails to meet the initial margin requirement following a new trade, requiring immediate action.
- Exchange call: Occurs when an exchange demands you increase your margin deposit due to shifting market conditions or updated requirements.
- Equity call: Raised when the value of the security held in your account falls below the minimum threshold required to sustain your open positions.
Margin call example
Say you open a trading account with a $10,000 deposit and use leverage to take a position worth $100,000 on EUR/USD. Your broker requires a maintenance margin of 1%, meaning you must always hold at least $1,000 in usable margin. If the market moves against you and your account equity drops to $1,000, your broker will issue a margin call.
At that point, you have two options: deposit additional funds to bring your account back above the required level, or close one or more positions to free up margin. If you take no action and the market continues moving against you, your broker may step in and close your positions automatically.
Do my positions get closed?
Not automatically. At least not straight away. When a margin call is issued, you are given the opportunity to either deposit more funds or close positions to reduce your exposure before your broker steps in. However, if your equity continues to fall and hits your broker’s stop-out limit, your positions will be closed automatically.
How to prevent margin calls?
Avoiding a margin call comes down to disciplined account management and a clear understanding of your exposure at all times. Here are five practical steps to help:
- Use leverage sensibly: High leverage increases your ability to control larger positions, but it also accelerates losses. Keeping leverage modest relative to your account size significantly reduces the risk of a margin deficiency.
- Set stop losses on every trade: A well-placed stop loss caps the damage a losing position can result in before it is closed automatically.
- Monitor your account regularly: Keeping a close eye on your free margin means you can act early rather than being caught off guard.
- Build a margin buffer: Never use your entire deposit. Leave enough free margin in your account to absorb unexpected market moves.
- Rank your positions by risk: Rank your open trades by exposure and consider trimming the riskiest ones during periods of heightened market uncertainty. Learning to build this habit early makes a genuine difference over time.
Conclusion
Margin calls are a straightforward reality of leveraged trading, and understanding them properly is part of becoming a more informed and responsible trader. Knowing what triggers them, how to respond, and how to prevent them puts you in a far stronger position to protect your investment and manage your account with confidence.
When you are ready to trade with a broker that offers clear margin policies and transparent conditions, FxPro is here to support you every step of the way.