What Is a Margin Call and How to Avoid One

A margin call is a warning from your broker that your account’s equity has dropped close to the minimum required to keep your open positions running — it’s a signal to act before the broker acts for you.

How it’s triggered

Every open leveraged position requires margin to be held as collateral. As losses grow, your account equity falls. Once equity drops to a certain percentage of the required margin (the “margin call level,” set by the broker), you’ll receive a margin call notification.

What happens if you don’t respond

If equity keeps falling past the margin call level and reaches the broker’s “stop out level,” the broker will begin automatically closing your open positions — starting with the largest losing ones — to prevent your account balance from going negative.

How to avoid one

The most reliable way to avoid a margin call is proper position sizing and consistent use of stop losses, so no single trade or combination of trades can push your account anywhere near the danger zone in the first place.

What to do if you get one

You can add funds to increase your equity, or close some positions manually to free up margin and reduce risk — either restores breathing room before the broker’s automatic stop out kicks in.

Key takeaway

A margin call is a last-resort safety mechanism, not a normal part of trading. If you’re managing risk with sensible position sizes and stop losses, you should rarely — if ever — see one.