Margin Level, Margin Call and Stop-Out in Forex (with Examples)

Margin level is your equity divided by your used margin, shown as a percentage. When it falls to the broker's margin call level (often 100%) you get a warning, and when it reaches the stop-out level (50% for retail clients in the UK and EU, often lower with offshore brokers) the broker starts closing your trades automatically, beginning with one of the losing positions. Knowing these levels lets you calculate in advance exactly how far price can move before your account is closed for you.

The numbers that matter

From the leverage lesson:

• Equity = balance ± open profit or loss
• Used margin = margin locked by open positions
• Free margin = equity − used margin
• Margin level = equity ÷ used margin × 100%

As a trade loses, equity falls while used margin stays the same, so the margin level falls.

Margin call vs stop-out

Level	What happens	Typical settings
Margin call	Warning: you cannot open new positions, and you may get an alert	Often 100%, sometimes higher
Stop-out	The broker closes positions, usually the largest loss first, until the margin level recovers	50% for UK and EU retail CFDs (an ESMA rule since 2018); 20% to 50% at many offshore brokers

The name "margin call" comes from the days when a broker would phone you to deposit more money. Today it is usually just a pop-up, and some brokers skip it entirely. Check your broker's exact margin call and stop-out levels in its account terms.

One position, three leverage levels

Let us take a 1,000-dollar account that buys 0.20 lot of EUR/USD at 1.1000. The position is worth 22,000 dollars and each pip is worth 2 dollars. Margin call at 100%, stop-out at 50%.

Two surprises for most beginners:

1. The loss per pip is identical at every leverage: 2 dollars. Leverage did not make this trade riskier; its size did.
2. Higher leverage lets the loss run further. At 1:500 the stop-out only fires when 98% of the account is gone. Low margin is not a safety feature; it simply means the broker's safety net sits closer to zero.

Now use the leverage fully

The real danger comes when high leverage tempts you into a bigger position. Same 1,000-dollar account, but at 1:500 the trader opens 4 lots of EUR/USD at 1.1000.

That is the classic way a small account is lost in one evening.

Gaps and negative balances

On 15 January 2015 the Swiss National Bank suddenly removed its 1.20 minimum exchange rate for EUR/CHF. Within minutes the euro fell far below 1.00 francs before recovering partly later that day. There was almost no trading in between, so stop-losses and stop-outs were filled hundreds of pips away from their levels. Many retail accounts went into negative balance, meaning traders owed their brokers money, and some brokers themselves failed or needed emergency funding.

Since then, negative balance protection has become mandatory for retail CFD clients in the UK, EU and Australia: you cannot lose more than the money in your account. Many offshore brokers offer it too, but check that it is in your contract, not just in their advertising. Even with it, you can still lose your whole deposit.

How to stay far away from stop-out

• Use a stop-loss on every trade and size the position so that the stop costs a small, fixed share of your account. See Position Sizing.
• Watch your margin level, not just your profit. A margin level of several hundred percent leaves room for normal moves; a level near 100% means one bad candle closes you out.
• Do not add to losing positions to "average down". It raises used margin and losses together.
• Count correlated trades as one. Long EUR/USD, long GBP/USD and short USD/CHF are three bets against the dollar; they can all fall at once. See Forex Correlations.
• Be careful before weekends and big news, when brokers may raise margin requirements and prices can gap.
• Do not deposit more to avoid a stop-out unless your plan said so before the trade. Feeding a losing position is the most expensive habit in trading.

Margin call levels change

Brokers can change margin requirements at short notice, for example ahead of elections, central bank meetings or long weekends, and for exotic pairs and gold. Regulators also update their rules from time to time. Check the current figures on your broker's website and in your platform's contract specifications before you trade, not after.

Next: what it costs to hold a trade overnight in Swaps, Rollover and the Carry Trade.