Risk management · Intermediate

Understanding Margin Calls and Stop-Outs

A stop-out is not a risk control. It is what happens after every risk control you were supposed to have has already been passed.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

In short

Margin level is account equity divided by used margin, expressed as a percentage. A margin call is a broker warning at a defined level, often around 100%, and a stop-out is a lower threshold, frequently 50%, at which the broker automatically closes positions starting with the largest loser. Thresholds vary by broker and are set out in your account terms.

What to remember

Margin level is equity divided by used margin. Both halves move as a position goes against you, which is why it falls quickly.
At the stop-out level the broker closes positions at market with no input from you, and no regard for your analysis.
Leverage does not change what a losing trade costs, only how close the stop-out sits and how large a position you are permitted to open.
Set your own margin floor above the broker threshold, so that if exposure has to come down you choose which position and at what price.

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The broker's last line of defence

Margin calls and stop-outs are automatic mechanisms that activate when losses on your open positions reduce account equity too far relative to the margin those positions require. They exist to protect the broker from an account going negative, and they have a side effect that matters to you: at the stop-out level, the broker closes your positions, at market, at whatever price is available, with no input from you.

Reaching that point is not a risk-management event. It is the failure of risk management, arriving after every earlier control has already been passed. Everything in this lesson is about staying far enough away that the mechanism never becomes relevant.

The numbers involved

Three quantities do the work:

Equity. Your balance plus or minus the floating profit and loss on open positions. This moves tick by tick.
Used margin. The collateral the broker holds against your open positions. It depends on position size and leverage, not on your stop.
Margin level. Equity divided by used margin, expressed as a percentage. This is the number the thresholds are measured against.

A margin call is a warning at a broker-defined level, often around 100%, meaning your equity has fallen to roughly the amount of margin in use. A stop-out is a lower threshold, frequently 50% but varying widely, at which the broker automatically begins closing positions, typically starting with the largest loser, until the margin level recovers.

Watching a margin level fall to the stop-out

A 5,000 USD account at 1:100 leverage opens 2 standard lots of EUR/USD. Notional value is about 200,000 USD, so used margin is about 2,000 USD. Equity starts at 5,000, giving a margin level of 250%.

Move against the position	Floating loss	Equity	Margin level
0 pips	0	5,000	250%
100 pips	-2,000	3,000	150%
150 pips	-3,000	2,000	100% (margin call)
200 pips	-4,000	1,000	50% (stop-out)

Two hundred pips on EUR/USD is a large move but not an exotic one, and the account is closed out having lost 80% of its equity. Notice what was missing from this trade: a stop loss, and a position size derived from one. Two lots on a 5,000 USD account is roughly 20 USD per pip, which means a 50-pip stop would have risked 1,000 USD, or 20% of the account, in a single trade. The margin calculator shows the requirement before you open, and the position size calculator shows the size that would have been appropriate.

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What leverage does and does not do

Higher leverage reduces the margin required per lot, which means the same deposit can support a much larger position. It does not change what a losing trade costs: that is set by stop distance and position size. What it changes is how close the stop-out sits, because used margin is smaller relative to the exposure you are carrying, so a given adverse move eats a larger share of the buffer.

The practical reading is that leverage is a constraint on what you are permitted to do, not a setting that makes trades better or worse. A trader sizing from a fixed risk percentage will rarely notice their leverage setting. A trader sizing from what the platform allows is being sized by the broker's risk limits rather than their own, which is the situation this lesson describes. The leverage calculator shows the effective leverage your current positions imply, which is usually the more informative number.

One consequence catches people out. Used margin is set when the position opens and does not shrink as the trade goes against you, so the entire floating loss comes out of equity alone. That makes the distance to a stop-out shorter than the headline margin level suggests: in the example, 250% looks like a comfortable buffer, and the account is 3,000 USD of floating loss from a margin call and 4,000 from a forced closure, which on a two-lot position is 150 and 200 pips respectively.

Staying well clear

Use a stop on every position. A stop placed at a sensible distance ends a trade long before margin level becomes relevant.
Size from risk, not from available margin. The question "how much can I open" has nothing to do with "how much should I open".
Watch margin level, not free margin. Free margin can look comfortable while the level is deteriorating quickly, because equity and used margin both move.
Set your own floor. Pick a margin level, well above the broker's call threshold, at which you reduce exposure yourself. Doing it voluntarily means choosing which position closes, and at what price.
Remember the thresholds vary. Call and stop-out levels differ by broker, account type and jurisdiction, and they are stated in your account terms. Check them rather than assuming the common figures apply.

One more point worth saying plainly. Adding funds to an account in drawdown restores margin level and postpones a stop-out, and it also increases the amount at risk in a situation that is already going badly. It is occasionally the right decision and frequently the expensive one. Reducing position size achieves the same margin relief without adding capital to a losing position, which is why it is the first response in most risk frameworks rather than the last.

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

FAQ

Understanding Margin Calls and Stop-Outs: questions

What is a margin call in forex?

A margin call is a broker warning triggered when your margin level, meaning equity divided by used margin, falls to a defined threshold, often around 100%. It signals that floating losses have eaten most of the buffer above your collateral requirement. It is not itself a closure, but it is the last warning before the stop-out level at which the broker begins closing positions automatically.

What happens at a stop-out level?

The broker automatically closes open positions, usually beginning with the largest losing one, until the margin level recovers above the threshold. This happens at market prices with no input from you, so in fast conditions the fills can be poor. It exists to stop the account balance going negative rather than to protect your trade, and reaching it means every earlier control has already failed.

Does higher leverage increase the chance of a margin call?

Indirectly, yes. Leverage does not change what a stopped-out trade costs, which is set by stop distance and position size, but it lowers the margin required per lot and so allows much larger positions on the same deposit. A larger position means a given adverse move consumes a bigger share of your equity, which brings the stop-out threshold closer.

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