Your stop loss was where you wanted it. Your read on the pair was reasonable. Then at three in the morning the platform closed two positions you never touched, at prices you never picked, and the account you woke up to was smaller than the worst case you had planned for.
That is a stop out. The margin call that came before it had almost nothing to do with whether you were right about direction.
A margin call is arithmetic on the size you opened. By the end of this you will be able to work out, before you click buy, roughly how far price has to travel before your broker starts making decisions on your behalf.
Key Findings
- The trigger: a margin call fires when your margin level percentage reaches a threshold your broker publishes, regardless of which trade caused the drop.
- The formula: margin level is equity divided by margin currently in use, times 100, so it falls both when floating losses grow and when you open more positions.
- Two separate events: the margin call warns you, the stop out closes trades automatically, and the stop out sits at the lower threshold.
- The real cause: total position size and correlation set how far price can move before the threshold is reached; direction only sets the speed.
What actually triggers a margin call in forex?
Your margin level percentage touching the broker’s warning threshold. Not a bad trade, not a gap, not a news release. Those are only the means.
Four numbers govern the whole thing, and most traders watch the wrong one. Balance is closed money and it barely moves during a drawdown. Equity is the number that matters, because it already includes every floating loss sitting on your open trades.
| Account number | What it is | What moves it |
|---|---|---|
| Balance | Money from closed trades only | Closing a position, deposits, withdrawals, swap charges |
| Equity | Balance plus every open profit and loss | Every tick, while positions are open |
| Used margin | The deposit locked behind your open positions | Opening or closing trades, and your leverage setting |
| Free margin | Equity minus used margin | Falls from floating losses and from new positions |
| Margin level | Equity divided by used margin, as a percentage | Both of the two rows above, at the same time |
Watch balance during a drawdown and you will feel fine right up until the platform acts. Equity is what the broker is reading.
How is margin level calculated, and what pushes it down?
Equity divided by used margin, multiplied by 100. That is the fraction the broker checks on every tick, and there are two independent ways to hurt it.
The first is obvious. Floating losses eat equity, so the top of the fraction shrinks while the bottom stays put.
The second catches people out. Opening another position raises used margin, so the bottom of the fraction grows. Add a rescue trade while you are already down and you move both halves against yourself in a single click. That is the mechanism behind most blown accounts I have looked at, and it feels like conviction at the time.
Margin call or stop out: which one ends the account?
The stop out does. The margin call is the last moment the decision is still yours.
| Margin call | Stop out | |
|---|---|---|
| What happens | A warning is sent or displayed | Positions are closed automatically |
| Who acts | You do | The broker’s system does |
| Your options | Add funds, close a trade, reduce size | None, it has already happened |
| Threshold | The higher of the two levels | The lower level, published in the account terms |
| Typical feeling | Manageable, so it gets ignored | Sudden, and usually at the worst available price |
Two things make the stop out worse than the number suggests. It closes at market during whatever conditions caused the drop, which is when spreads are widest. And it takes the positions it takes, which may not be the ones you would have chosen to sacrifice.
Why does the account die from size rather than from being wrong?
Because the threshold is a distance, and position size sets how many pips of adverse movement fit inside that distance.
Cut your size in half and the same drawdown in equity terms takes roughly twice the price movement to produce. The market has not changed. Your survivable range has doubled. That is the entire trade-off, and it is why position sizing set from a fixed risk percentage does more for account survival than any entry filter.
RelicusRoad Pro
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Get RelicusRoad ProDo correlated pairs pull the stop out closer?
Yes, and this is the version that catches experienced traders rather than beginners.
Three positions on different symbols look like diversification on the platform. If those symbols share a dominant currency, a single move in that currency drags all three at once, and your equity falls three times faster than the position count suggests. The margin arithmetic does not know they were meant to be separate ideas. Reading your open book through currency correlation before you add the third trade is the cheapest fix available.
What do the rules require brokers to do?
In several major jurisdictions the close-out point is set by regulation rather than by the broker.
ESMA’s product intervention measures, decided in May 2018 and applied to contracts for difference from that August, fixed the margin close-out point for retail accounts at 50% of the required margin, capped leverage on major currency pairs at 30:1, and required negative balance protection. The UK’s FCA made equivalent rules permanent for firms it authorises in 2019, and ASIC’s product intervention order took effect in Australia in March 2021.
Two consequences worth holding on to. Under those rules a retail account cannot normally end up owing the broker money beyond the deposit. And a broker outside those regimes is not bound by any of it, which is one more line to check when you are choosing where to open the account .
What check do you run before you enter?
Three questions, and they take under a minute.
First: what is my margin level right now, with the positions I already have open? Second: how much used margin will this new trade add? Third: how far can price move against the whole book before the level reaches the close-out threshold?
If the answer to the third question is a distance you have seen the pair travel in a normal week, the trade is too big. Not wrong, too big. That distinction is worth more than any entry signal, and it is the same reasoning behind risk of ruin arithmetic .
Where does a signal you trust change any of this?
Honestly, not at the arithmetic. No indicator adds margin to your account, and anything sold on that promise is selling you something else.
What a stable signal changes is the count of positions you open out of doubt. The classic path to a stop out is not one bad trade. It is entering, watching the arrow that got you in shift to the other side of the bar, closing at a loss, re-entering when it flips back, then adding size to make the round trip back. Four positions later, the used margin is what kills you.
RelicusRoad Pro locks its signals at candle close and leaves them there, on MetaTrader and on TradingView. The value of that is not accuracy in the abstract. It is that you stop opening trades to correct for a chart that keeps rewriting yesterday, and the used-margin column stops creeping.
Everything else is still yours: the size, the patience, and whether you respect the one percent rule when the setup looks obvious.
Frequently asked questions
What is a margin call in forex? It is a warning that the equity supporting your open positions has fallen close to the minimum needed to keep them open. Brokers express the trigger as a margin level percentage, which is equity divided by the margin currently tied up in trades. Nothing is closed at that moment, but the account has very little room left.
What is the difference between a margin call and a stop out? The margin call is a notification and the stop out is an action. At the call level you can still add funds or reduce exposure yourself. At the stop out level the platform begins closing positions without asking, until the margin level recovers.
Does a stop loss prevent a margin call? It caps the loss on one position, which helps, but it does not protect the account alone. Several trades drifting at once can pull your margin level to the close-out threshold before any individual stop is reached.
Does higher leverage cause margin calls? Leverage does not create losses. It changes how much of the account each position consumes, which frees you to open more of them, and that extra capacity is where the trouble starts.
Which position does the broker close first at the stop out level? That varies, and the answer is in your account terms. Many brokers close the largest floating loss first, some close the position using the most margin, and some work in the order the trades were opened.
Check your margin level and your broker’s close-out threshold today, then size the next trade around that distance. If you want entries that stay where they printed instead of pulling you into a fourth position, start with RelicusRoad Pro .