Margin and Margin Calls — Risk and Trade Management

What Margin Is

Margin is the portion of your account balance set aside by your broker as a good-faith deposit to open and maintain a leveraged position. It is not a fee or a cost — it's collateral that gets released back to your free balance when the trade closes.

[Read the lesson: Margin and Margin Calls](/learn-to-trade/risk-and-trade-management/margin-and-margin-calls)

Margin Level and the Margin Call

Margin level is calculated as (Equity / Used Margin) × 100%. As losing trades reduce your equity while used margin stays the same, this percentage drops.

When margin level falls to a broker-specified threshold, often around 100%, the broker issues a margin call, warning that your account cannot safely support any new risk. If losses continue and margin level falls further, often near 50%, the broker may automatically start closing positions — called a stop-out — to prevent the account from going negative.

**Calculating Margin Level:** Account equity: $900. Used margin: $1,000. Margin level = ($900 / $1,000) × 100% = 90%. If the broker's margin call threshold is 100%, this account has already triggered a margin call.

[Read the lesson: Margin and Margin Calls](/learn-to-trade/risk-and-trade-management/margin-and-margin-calls)

Why Margin Calls Signal Poor Risk Management

A margin call rarely comes as a surprise to a trader following sound risk management, because such a trader is risking only a small percentage of their account per trade and sizing positions appropriately. Margin calls are far more common among traders who overleverage, opening positions too large for their account size.

The best way to avoid margin calls isn't to watch margin level nervously — it's to use proper position sizing and stop-losses so that no single trade or combination of trades can push the account anywhere near that danger zone.

[Read the lesson: Margin and Margin Calls](/learn-to-trade/risk-and-trade-management/margin-and-margin-calls)