Lesson 23 of 53
Margin call & stop out
8 min read
Chapter checkpoints
0/5- The five numbers, in order
- What a margin call actually is
- What a stop out is
- Following the same account down
- How to never see either one
Optional — tick a chapter as you finish it to keep your place inside this lesson.
A margin call and a stop out are the broker's own risk controls, not yours. They exist to stop your account going negative — not to protect your capital. By the time either one fires, the decision that caused it was made much earlier: the position was too big for the account.
The five numbers, in order
Every account screen shows the same chain. Read it left to right and the two warning levels make immediate sense.
Balance
cash in the account, ignoring open trades
Equity
balance ± floating profit/loss of open trades
Used margin
the deposit locked to hold those positions
Free margin
equity − used margin: what is still available
Margin level %
equity ÷ used margin × 100
| Number | What it is | Worked example |
|---|---|---|
| Balance | Cash in the account, ignoring open trades | $1,000 |
| Equity | Balance ± floating profit/loss | $1,000 − $150 floating loss = $850 |
| Used margin | Deposit locked to hold the open positions | $500 (0.5 lots at 1:100) |
| Free margin | Equity − used margin | $850 − $500 = $350 |
| Margin level % | Equity ÷ used margin × 100 | $850 ÷ $500 = 170% |
What a margin call actually is
A margin call is a warning that your equity has fallen too close to the margin your open positions require — commonly triggered when the margin level drops to around 100%, though the exact figure varies by broker and account type. At that point you usually cannot open new trades, and you have three options: add funds, close part of the position, or watch.
It is a symptom, not an event
A margin call never arrives out of nowhere. It arrives because the position size assumed the trade could not move very far against you. The floating loss is doing the damage; the call is just the point at which the broker notices.
What a stop out is
If price keeps going the wrong way, equity keeps falling and the margin level keeps dropping. At the stop out level — often around 50%, again broker-dependent — the platform automatically closes your positions, typically starting with the largest losing one, until the margin level is back above the threshold.
- It is automatic. There is no confirmation dialog and no way to negotiate it.
- It closes at the market price available at that moment, which in fast conditions can be worse than the stop out level implies.
- It happens at the worst possible price, by definition: the point of maximum loss on the move.
- Continuing our example: that $1,000 account with 0.5 lots open would be stopped out once equity fell to roughly $250 — a 75% loss on one trade.
Following the same account down
| Floating P/L | Equity | Used margin | Margin level | Status |
|---|---|---|---|---|
| $0 | $1,000 | $500 | 200% | Healthy |
| −$150 | $850 | $500 | 170% | Normal fluctuation |
| −$400 | $600 | $500 | 120% | Uncomfortable — nearing the warning |
| −$500 | $500 | $500 | 100% | Margin call: no new trades |
| −$750 | $250 | $500 | 50% | Stop out: positions force-closed |
How to never see either one
This is the same answer as the position sizing lesson earlier in this module, and that is the point. If a single trade risks 1% of the account and the stop loss is honoured, your equity cannot fall far enough to matter — the stop closes the trade hundreds of dollars before the broker ever would.
- Size every trade from the stop distance and a fixed risk percentage, never from what the margin allows you to open.
- Attach the stop loss when you open the order, not afterwards. A margin call is what happens to trades without one.
- Keep total open risk across all positions capped — 2–3% of the account, not 1% per trade multiplied by ten trades.
- Treat free margin as a buffer, not as capital waiting to be used. Using it all is how one bad hour ends an account.
- Know your own broker's margin call and stop out percentages before you deposit; they are in the account type specification.
The honest summary
The broker's stop out is the loss you did not choose. Your stop loss is the loss you did. Everything in this module exists so that the first one never gets a chance to happen.
Size the trade before it can size you
Enter your balance, risk percentage and stop distance to get the lot size that keeps a margin call impossible.
Progress is saved on this device.