If you are new to Forex trading, you will often hear about margin, equity and margin calls. These are not complicated. They are simply the mechanics of how your trading account works. By understanding them, you can control your risk and trade more confidently.
This guide explains what margin is, what a margin call means, what the margin call level is and how to avoid margin calls.
Margin – Money Set Aside for a Trade
Margin is the money your broker holds as collateral to open and maintain a position. It is not a fee. When you close the trade, the broker releases this amount back to your free balance.
Small trades require small margins
Larger trades or higher leverage require larger margins
Example: You have $1,000 in your trading account. You open a 0.1 lot GBP/USD trade with 1:100 leverage. The required margin might be $100. The broker holds $100 and leaves $900 as free margin.
Equity – Your Real-Time Account Value
Equity is the total value of your account at the current market price. It equals your balance plus or minus any open profit or loss.
If your trade is in profit, equity rises above your balance
If your trade is in loss, equity drops below your balance
Example: If your trade shows a $20 profit, your equity becomes $1,020. If your trade shows a $50 loss, your equity becomes $950. Equity changes constantly as market prices move.
What Is a Margin Call
A margin call happens when your equity becomes too low compared to your required margin. It is a warning from your broker that your account may not have enough funds to support open trades.
When your equity reaches a preset level, you receive a warning
This gives you time to add funds or close trades to reduce margin use
If losses continue and you take no action, the broker will start closing positions automatically (stop-out)
Example: You have $1,000 balance and $100 required margin. If your broker's margin call threshold is 100%, you get a warning when equity = $100. If it falls further to 50%, the broker starts closing trades.
К сожалению, это изображение не соответствует нашим правилам. Чтобы продолжить публикацию, пожалуйста, удалите изображение или загрузите другое.
Margin Call Level
The margin call level is the percentage at which your broker issues a margin call. It is calculated as:
Margin Level = (Equity ÷ Margin) × 100
If your broker sets the margin call level at 100%, you are warned when your equity equals your margin. If the stop-out level is 50%, trades are closed automatically once equity drops to half the margin.
Margin calls occur when the market moves against your position and your equity declines. High leverage and large trade sizes make this happen faster because both profits and losses are magnified.
Example: Trading 1 standard lot on a $1,000 account is very risky. A small price move can wipe out your equity. Trading 0.01 lot on the same account is much safer.
How to Avoid Margin Calls
Margin calls are stressful but preventable. Here is what you can do:
Use low leverage – lower leverage reduces the required margin and gives prices more room to move
Trade small lot sizes – smaller positions keep your margin low and equity safer
Use stop-loss orders – a stop loss automatically closes your trade if the price moves against you
Monitor your margin level – keep it well above the margin call level (many traders aim for 300–500% or more)
Add funds when necessary – if a trade still has potential but is temporarily in loss, adding money can increase your equity and margin level (advanced and high-risk)
Good Habits
New traders often focus only on entry signals and profit targets, forgetting about margin. Make risk control part of every trade plan:
Check how much margin the trade will use
Review your free margin and margin level
Place a stop-loss order
Decide how much you are willing to lose
By making these steps a habit, you reduce the chance of a margin call and keep your account stable.
Key Takeaways
Margin is the money set aside to hold a trade
Equity is the total account value including open profit or loss
Margin Level = (Equity ÷ Margin) × 100
Margin Call Level is the percentage where your broker warns you
Stop-Out Level is the percentage where your broker starts closing trades
High leverage and large trade sizes increase the risk of a margin call
Use small lots, low leverage and stop-loss orders to avoid margin calls
Final Thoughts
A margin call is not a penalty. It is a safety mechanism to protect you from losing more than you have. By understanding equity, required margin, margin call levels and stop-out levels, you learn one of the most important lessons in Forex trading.
Keep your margin level high and practice proper risk management. This will protect your account, help you stay in the market longer and build your trading skills with less stress.
