Margin Call and Stop-Out: When the Broker Closes Your Trades
Macro Glossary, Forex Mechanics
By Ken Chigbo, macro trader and founder of KenMacro, 18+ years in markets.
Updated 2026-05-20
The desk’s answer
Margin call is the broker’s warning that account equity has fallen close to the margin required to hold open positions. Stop-out is the automatic forced closure of positions when equity hits the floor. Both are triggered by the margin level percentage, calculated as equity divided by used margin times 100. A typical FCA broker margin call is at 100 percent margin level, with stop-out at 50 percent. ESMA rules require stop-out at 50 percent across the EU. Once stop-out triggers, the broker closes the largest losing position first and continues until margin level recovers above the threshold.
Defined term, Margin call
A margin call is the broker’s notification that account equity has fallen close to the margin required to hold open positions, expressed as a margin level percentage (equity divided by used margin times 100). The stop-out level is the percentage at which the broker automatically closes positions, starting with the largest loser, to prevent the equity from going negative.
How margin level is calculated
Margin level = (equity / used margin) times 100. Equity is account balance plus unrealised profit and loss on open positions. Used margin is the sum of margin requirements across all open trades. With a 10,000 dollar account, 2,000 dollars of used margin, and an unrealised loss of 1,500 dollars, equity is 8,500 dollars and margin level is 8,500 / 2,000 times 100 = 425 percent. As losses grow, equity falls and margin level falls. When margin level reaches the margin-call threshold (typically 100 percent), the broker notifies the trader. When it reaches the stop-out threshold (typically 50 percent under ESMA), the broker starts closing positions.
The mechanics of a stop-out
When margin level hits the stop-out level, the broker’s risk engine closes positions automatically. The typical order is largest loser first, because closing the biggest loser frees the most margin and recovers margin level fastest. The closure executes at the prevailing market price, which in a fast-moving tape can be materially worse than the screen quote, leaving the account closer to zero than the stop-out percentage suggested. Stop-outs in extreme moves can leave a small residual balance, exactly zero, or in rare unregulated cases a negative balance the broker bills the client for. Negative balance protection, required under ESMA, prevents the negative-balance outcome for retail.
Avoiding stop-out
The reliable defence is sizing positions so the stop-loss on each trade is hit long before margin level falls to call. With a 1-percent-per-trade rule, ten consecutive losers cost 10 percent of equity, which on a healthy account leaves margin level well above the stop-out threshold. The traders who get stopped out are almost always oversized: a small number of positions where a normal adverse move consumes 30 to 50 percent of equity. Add the cost of widening spreads in the news session that triggered the move and the buffer disappears even faster. Sane lot sizing prevents the situation rather than the stop-loss.
Frequently asked
What triggers a margin call?
The margin level percentage falling below the broker’s margin-call threshold, typically 100 percent. Margin level equals equity divided by used margin times 100. A drop below the threshold prompts the broker’s notification and a warning that further losses will trigger stop-out.
What is the stop-out level?
The margin level at which the broker automatically closes open positions to prevent equity from going negative. ESMA requires stop-out at 50 percent margin level for retail across the EU; many non-EU brokers also use 50 percent, with some setting it lower at 20 to 30 percent.
Can a margin call leave me owing money?
Under ESMA and FCA negative balance protection, no, for retail accounts. The broker absorbs the slippage cost. Under offshore regulation or for professional accounts without NBP, an extreme gap move can leave a negative balance the broker is entitled to bill the client for.
What this means at the desk
Margin call is a sizing problem, not an execution problem. Fix the lot size and the call never arrives.
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