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BrokaBoy/Glossary/Margin Call

Margin Call

A warning that your account equity has fallen too low to keep your open positions funded.

Margin is the deposit your broker holds against your open positions. As losses accumulate, your equity falls while the required margin stays the same. When the ratio between them drops below the broker's margin call level - often 100% - you are notified to either close positions or add funds.

Ignore it and you hit the stop-out level, commonly 50%. At that point the broker automatically closes your positions, starting with the biggest loser, to prevent the account going negative. This is not a punishment; it is the mechanism that keeps leveraged accounts solvent.

The practical defence is position sizing. If a single trade can move your margin level by tens of percent, the trade is too large for the account. Keeping free margin well above the call level gives losing positions room to breathe without forcing a liquidation at the worst possible moment.