Margin Call Explained in Depth:
What Happens and Why
A detailed exploration of margin calls, building on the earlier spotlight introduction, including what triggers them and what to do.
QUICK GUIDE
Explore this article
+
This lesson provides a more detailed exploration of margin calls, building on the spotlight introduction earlier in this module and the margin level formula from the previous lesson.
This is general educational content; specific margin call thresholds and processes vary significantly by broker, so always confirm details with your provider.
Recap: What Is a Margin Call?
As introduced earlier in this module, a margin call is a notification from a broker indicating that an account's margin level has fallen below a required threshold, generally serving as a warning that further losses could lead to automatic position closure.
How Margin Level Connects to Margin Calls
As covered in the previous lesson, margin level is calculated as (Equity Γ· Used Margin) Γ 100%. A margin call is generally triggered when this figure falls to or below a broker-specific threshold β thresholds discussed across different sources and brokers vary considerably, so this is very much an account- and broker-specific figure rather than a universal rule.
What Typically Happens During a Margin Call
During a margin call, open positions are generally not immediately closed β it serves as a warning requiring the trader's attention. Common responses include depositing additional funds to increase equity (and therefore margin level), or closing some open positions to reduce used margin (which also increases margin level, since the denominator decreases).
What Happens If a Margin Call Is Not Addressed
If margin level continues to decline after a margin call β for example, if losses continue to accumulate β the account may reach the stop-out level, covered in the next lesson, at which point automatic position closure typically occurs regardless of the trader's response.
π Summary
A margin call is triggered when margin level falls to or below a broker-specific threshold, generally serving as a warning rather than an immediate position closure. Common responses include depositing additional funds or closing positions to improve margin level, and if the margin level continues to decline, the account may reach the stop-out level covered in the next lesson.
Frequently Asked Questions
Are open positions closed immediately during a margin call?
Generally not immediately; a margin call typically serves as a warning requiring the trader's attention, before any automatic closure occurs.
What are common responses to a margin call?
Depositing additional funds to increase equity, or closing some open positions to reduce used margin, are both common ways to improve margin level.
What happens if a margin call is ignored?
If margin level continues declining, the account may reach the stop-out level, at which point automatic position closure typically occurs.
Is the margin call threshold the same for every broker?
No, this varies considerably by broker, account type, and jurisdiction, so it's important to confirm your specific provider's threshold.
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.
GTCFX operates as a multi-regulated group of companies, clients are kindly advised to confirm the specific legal entity, regulation, and jurisdiction under which they are being onboarded.
