What is “Margin Call Level” or a “Margin Call”?
In forex trading, the Margin Call Level refers to a specific percentage threshold that your Margin Level must stay above. If your Margin Level falls to or below this point, it triggers a Margin Call—a warning that your account is in trouble.
Think of it like a warning light flashing on your dashboard—your account doesn’t have enough equity to safely support your open trades.
Margin Call Level vs. Margin Call (What’s the Difference?)
This trips up a lot of traders, so let’s break it down:
- Margin Call Level: A predefined value, such as 100%, set by your broker. When your Margin Level falls to this point, you’ll receive a warning.
- Margin Call: The actual event that occurs when your Margin Level hits that threshold—usually a notification (email, message, or alert).
🔥 Analogy: Boiling Water
- Margin Level = Temperature
- Margin Call Level = 100°C (the boiling point)
- Margin Call = The water boiling (the event)
How is a Margin Call Triggered?
A Margin Call happens when:
Floating losses reduce your Equity to the point where it’s equal to or less than your Used Margin.
In other words:
Margin Level = (Equity ÷ Used Margin) × 100%
If this drops to 100% (or the broker’s set level), you’ll get a Margin Call.
Example: Margin Call at 100%
Let’s say your broker has a Margin Call Level of 100%.
Account Setup:
- Balance: $1,000
- You open a EUR/USD trade (1 mini lot = 10,000 units)
- Required Margin: $200
- Since there’s only one open trade, Used Margin = $200
Now, your trade goes south—you’re down 800 pips, or $800.
Step 1: Calculate Equity
Equity = Balance + Floating P/L = $1,000 – $800 = $200
Step 2: Calculate Margin Level
Margin Level = ($200 ÷ $200) × 100% = 100%
You’ve hit the Margin Call Level.
What Happens Next?
Once your Margin Level hits 100%:
- ❌ You can’t open new trades
- ✅ You can only close existing trades
- ⚠️ You’ll receive a notification from your broker (aka the Margin Call)
To continue trading, you’ll need to either:
- Deposit more funds to increase Equity
- Close some trades to reduce Used Margin
- Hope the market reverses in your favor and reduces floating losses
But What If Things Get Worse?
If your losing position keeps bleeding and your Margin Level drops below 100%, you’re not just in trouble—you’re in danger of a Stop Out.
A Stop Out Level is a lower threshold (like 50% or 20%, depending on the broker). Once reached, your broker will begin automatically closing your trades to protect itself.
Think of it this way:
- Margin Call = Warning
- Stop Out = Emergency action
⚠️ Boiling Water Analogy (Part 2)
- Margin Call = Water starts boiling
- Stop Out = You get burned
Recap
- Margin Call Level is the threshold that triggers a Margin Call (usually set at 100% Margin Level)
- Margin Call is the event when your Equity is equal to or less than your Used Margin
- When your Margin Level hits 100%, you can’t open new trades
- If the trade continues to lose money, you may hit the Stop Out Level, and your broker will begin closing trades automatically