What Is a Margin Call?
Learn what a margin call is, why it happens, and how it relates to leverage and account margin levels.
- 7 min read
- For beginners
- Educational
- Lezione 3 di 3
A margin call is one of the three spotlight topics in this Risk Management module, alongside What Is Leverage and Risk vs Reward. This guide introduces the concept, ahead of the more detailed Margin, Margin Level and Margin Call lesson later in this module.
This is general educational content; specific margin call and stop-out policies vary by broker and account type, so it's important to confirm details directly with your provider.
What Is a Margin Call?
A margin call is a notification from a broker indicating that an account's available margin has fallen below a required level, typically due to open positions moving unfavourably. It generally serves as a warning that further losses could result in positions being automatically closed if the account's margin level continues to decline.
How Margin Calls Connect to Leverage
As covered in the What Is Leverage lesson, leveraged positions are magnified relative to deposited capital, meaning losses can accumulate relative to account balance more quickly than with unleveraged positions. A margin call is one of the practical risk consequences of this magnification effect.
What Typically Happens After a Margin Call
If an account's margin level continues to decline after a margin call, brokers generally have a further stop-out level, at which point one or more positions may be automatically closed to prevent the account balance from going into further deficit. This process, along with related terms like used margin and free margin, is covered in more detail in the dedicated Margin lesson later in this module.
Why Understanding This Concept Matters
Understanding margin calls before trading with leverage helps set realistic expectations about the practical risk consequences of leveraged trading, reinforcing why concepts like position sizing and risk limits (covered in the Trading Essentials module) are important parts of a broader risk management approach.
Summary
A margin call is a broker notification indicating that an account's available margin has fallen below a required level, generally connected to the magnifying effect of leverage on open positions. Understanding this concept reinforces why risk management tools like position sizing and risk limits are important when trading with leverage.
Frequently Asked Questions
A margin call is generally triggered when an account's available margin falls below a required level, typically due to open positions moving unfavourably.
Risk Warning
Trading forex and CFDs involves significant risk and may not be suitable for all investors. You may lose all of your invested capital. Please ensure you fully understand the risks before trading.
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