What is a margin call?

What it is

A margin call is a notification from your broker that your account has fallen below the minimum margin required to keep your open positions running. It is effectively the broker saying: "Your losses have eaten into your collateral — either deposit more funds or we will close your positions for you."

A margin call is one of the most alarming events in trading. It usually means your account has experienced significant losses and is at risk of being closed out entirely.

How it works

When you open a leveraged trade, your broker holds some of your account balance as margin — collateral for the position. The remaining balance is your free margin — available for new trades and to absorb losses.

As your trade moves against you, your equity (balance + floating P/L) falls. When your equity drops to a certain percentage of your used margin — typically 100% or lower — the broker issues a margin call. If equity continues falling to the stop-out level (often 50% of margin), the broker automatically closes your largest losing position to reduce risk.

The margin call cascade

You open a trade using leverage — broker holds margin as collateral
Trade moves against you — equity falls as floating loss grows
Equity approaches used margin level — broker issues margin call warning
If you don't add funds, broker hits stop-out level — positions are closed automatically
Account may be left with a small remaining balance, or — in extreme cases — negative balance

A worked example

Account balance: $1,000. You open a 1-lot EUR/USD trade (margin required: $200 at 1:500 leverage). Free margin: $800.

EUR/USD moves 80 pips against you: floating loss = $800. Equity = $1,000 - $800 = $200. This equals the used margin of $200 — margin level is 100%. Margin call triggered.

If EUR/USD moves another 50 pips: equity drops below the stop-out level, broker closes the trade automatically. Account balance may be nearly zero.

Why it matters

For EA traders, margin calls are a serious risk with martingale or multi-position strategies — EAs that open additional positions as the market moves against them. If the market keeps moving in the wrong direction, position sizes grow and losses compound rapidly, making a margin call likely.

Common misconceptions

A margin call is not always a phone call. Most brokers handle it automatically — an email notification followed by automatic position closure at the stop-out level. You may have very little time to add funds.
Negative balance protection matters. In the EU and UK, regulated brokers must offer negative balance protection — meaning your losses cannot exceed your deposit. Not all offshore brokers offer this. Check before you fund an account.

The Karnek note

Karnek is read-only monitoring for MetaTrader - it watches every account you run, live on one dashboard, and alerts you the moment something stops. It never trades and never asks for a trading password.

See it in Karnek: see how Karnek works.