Margin Call (Margin Recollection) Complete Guide: Understand What Margin Recollection Is in One Minute

2026-01-06 16:12:50

What is a Margin Call? An Easy Explanation of Margin Maintenance

In leveraged trading, brokers require you to maintain a certain margin level. Simply put, a margin call is a warning signal from your broker—when your account incurs losses to a certain extent and your margin falls below the broker’s specified threshold, they will notify you to immediately add funds or close positions voluntarily.

Margin refers to the funds you need to freeze when opening a position. When floating losses exceed the used margin, a margin call will be triggered. This is the broker’s way of protecting themselves and maintaining market order.

How is the Margin Level Calculated? When Will You Be Margin Called?

The margin level is expressed as a percentage, and the calculation is straightforward:

Margin Level = (Account Equity ÷ Used Margin) × 100%

Key concepts include:

Account Equity: All cash in your account plus floating profit/loss of open positions
Used Margin: The total margin occupied by all open trades

When the margin level drops to 100%, your account equity equals or falls below the used margin. At this point, the broker will stop you from opening new positions. If the account continues to decline to the broker’s set stop-out level (usually 20%-30%), the system will automatically force close positions.

Real-Life Examples: How to Step-by-Step Trigger a Margin Call

Scenario 1: Risk of a Single Large Trade

Suppose you have a $1,000 account, buy EUR/USD worth $10,000 with a 5% margin requirement, so this trade uses $200 margin.

At this moment, the margin level = (1000 ÷ 200) × 100% = 500%

It seems very safe. But if the market suddenly moves against you, and floating losses reach $800, your account equity drops to $200.

The margin level instantly drops to = (200 ÷ 200) × 100% = 100%

You have triggered a margin call warning and cannot open new positions.

Scenario 2: Multiple Positions Compound Risk

Again, with a $1,000 account, you open five positions of $200 each (total margin $1,000). The margin level is now only 100%, leaving no buffer. Any small loss on any position will immediately trigger a margin call or even forced liquidation.

How to Avoid Being Margin Called?

Tip 1: Reduce Leverage Usage

Don’t use all your funds for margin. Even if 10x leverage is available, only use 2-3x. This preserves a large margin buffer.

Tip 2: Set Stop-Loss Orders

Pre-set stop-loss points for each trade. When the price hits your specified loss level, the system will automatically close the position. This actively controls losses and prevents passive margin calls.

Tip 3: Diversify Your Positions

Don’t concentrate all funds in one trading pair. Spread margin across different currencies or asset classes. Even if one position loses, others may profit, significantly reducing overall risk.

Tip 4: Regularly Monitor Your Account

Make it a habit to check your margin level weekly. When the margin level drops below 200%, consider adding funds or closing some positions before the broker enforces forced liquidation.

Tip 5: Develop a Trading Plan Based on Your Risk Tolerance

Before trading, define the maximum loss you can accept. For example, if your total account is $1,000, set a maximum loss of $50 per trade. This helps effectively control overall risk exposure.

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