Margin Call and Stop Out: What Happens When Leverage Bites
A margin call means you're running out of capital. Learn how margin calls work and how to avoid them. How margin calls happen, the warning signs and the level.
What Is a Margin Call?
A margin call occurs when your account equity falls below the required margin to maintain your open positions. The broker will notify you to either deposit more funds or close positions. If you don't act, the broker will close them for you.
The Stop Out Level
The stop out level is the point where the broker automatically closes your positions. Typically 50-100% of required margin. If your required margin is $2,000 and stop out is 50%, positions close when equity hits $1,000.
How to Avoid Margin Calls
- Keep free margin above 50% of your account
- Don't use more than 30% of margin at any time
- Use stop losses on every position
- Reduce position size during high volatility
- Monitor your account — don't let losing positions run unchecked
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.