Margin explained: the five numbers on your accountBalance, equity, used margin, free margin and margin level. Every leveraged platform shows all five, most traders watch one of them, and the one most people watch is the one that tells you least.Margin calls and stop outs
One is a warning. The other is your broker closing your positions for you, at the worst possible moment, without asking. They are not the same threshold and they are not the same event.
A leveraged account is not allowed to lose indefinitely. Two thresholds sit underneath it, both set by the broker and both expressed as a margin level - equity divided by used margin. Reach the first and you are warned and restricted. Reach the second and the broker starts closing positions.
Most traders learn the difference during the event itself, which is the expensive way. Everything below assumes you already know what margin level is and how it moves.
The two thresholds
A common pairing is a margin call at 100% and a stop out at 50%, but neither figure is standard and both vary by broker and account type.
Margin call
A warning and a restriction. Despite the name, nobody telephones you - it usually arrives as a platform alert, an email, or simply as the inability to open anything new.
Your positions are not closed. You can add funds, reduce exposure, close something yourself, or do nothing and let it develop.
It is set by the broker, not by you, and it applies to the account as a whole.
Stop out
Automatic liquidation. The broker begins closing positions to reduce exposure, in an order it decides, without waiting for your approval.
You agreed to this when you opened the account. A trader has no right to keep a leveraged position open while equity keeps falling.
It defines when closing starts. It guarantees nothing about the price you get.
How an account reaches both
$5,000 deposited, several positions opened requiring $1,000 of margin between them. The broker calls at 100% and stops out at 50%.
Opened
- Equity
- $5,000
- Used margin
- $1,000
- Free margin
- $4,000
- Margin level
- 500%
Comfortable, and comfortable is where almost all of a trading life is spent.
Down $3,000
- Equity
- $2,000
- Used margin
- $1,000
- Free margin
- $1,000
- Margin level
- 200%
Sixty per cent of the account is gone and no threshold has been touched. Nothing has warned you.
Down $4,000: margin call
- Equity
- $1,000
- Used margin
- $1,000
- Free margin
- $0
- Margin level
- 100%
Equity now equals used margin. Warnings appear and new positions are refused. The existing ones stay open.
Down $4,500: stop out
- Equity
- $500
- Used margin
- $1,000
- Free margin
- −$500
- Margin level
- 50%
Liquidation can begin. There is no guaranteed interval between the previous stage and this one - in a fast market it can be seconds.
Which position gets closed first
Not necessarily the one you would choose. Brokers use different liquidation rules: largest losing position first is common, but so are largest margin requirement, largest position, oldest position, and closing everything at once.
The process is usually iterative. Closing one position realises its loss and releases its margin, which raises the margin level; the broker recalculates and stops if the account has recovered above the threshold. So a stop out does not always mean every position goes - and it also means a profitable position can be closed if the rules select it.
Which rule your broker uses is in its terms rather than on its marketing pages, and it is worth reading before you need it.
Why a stop out does not guarantee a price
The threshold decides when the broker starts trying to close. It says nothing about what price is available when it does. In a fast market, or across a weekend gap, the next tradable price can be far past the level where liquidation should have happened - the mechanism was never able to execute in between. That gap between intention and execution is slippage, and during a liquidation it is at its worst.
In an ordinary week this is invisible. It matters on the handful of days that decide whether an account survives.
Negative balance protection, and what our records actually say
If liquidation executes far enough past the threshold, an account can end below zero, and without protection the shortfall is a debt you owe the broker. Negative balance protection caps the loss at your deposit. It is mandatory for retail clients under ASIC, the FCA and CySEC.
Across the hundred brokers we rate, only 45 record an unqualified yes, 12 record no, and the remaining 43 record a qualified one - protection that follows the legal entity that opened your account rather than the brand on the website. What that qualification actually means is worth reading before assuming you have it.
Adding money is not the same as reducing risk
Both raise your margin level, and they do completely different things. Depositing funds increases the equity supporting the same exposure - if the positions keep losing, the new money goes too. Closing a position reduces the exposure itself, and because it releases used margin as well as realising the loss, it usually improves the margin level faster.
Deciding which to do in the middle of a drawdown is the hardest possible moment to decide it. That is the argument for having a rule in advance.
Before you need any of this
Six things worth knowing about your own account while nothing is going wrong.
- What margin level triggers a margin call at my broker?
- What margin level triggers a stop out?
- In what order does my broker liquidate positions?
- Does negative balance protection apply to my entity and client classification?
- How much free margin do I have as a percentage of equity right now?
- Are any of my open positions really the same bet?
The first four are in the broker's terms; the last two are on your own platform.
Questions people ask about margin calls
What is the difference between a margin call and a stop out?
A margin call is a warning and a restriction on opening new positions. A stop out is the level at which the broker begins closing existing ones automatically. The call normally comes first.
How long do I have after a margin call?
There is no guaranteed period. If the market keeps moving against you the account can travel from margin call to stop out in seconds.
Does zero free margin mean I am about to be stopped out?
Not necessarily. Zero free margin means equity equals used margin, which is a 100% margin level. If your broker stops out at 50%, there is still room below you - but no buffer left above.
Is a lower stop-out level better?
Not automatically. A 20% stop out gives positions more room than a 50% one, and it also lets more of your equity disappear before the broker intervenes. It is a liquidation rule, not a measure of quality.
Can my broker close a trade without asking me?
Yes. You agreed to the margin and liquidation rules when you opened the account, and at the stop-out threshold the broker can act without approval.
Can a stop out leave me owing money?
It can, if execution lands far enough past the threshold. Negative balance protection prevents that outcome for eligible clients, but our records show only 45 of 100 brokers with an unqualified yes on that field.
Does using a stop loss prevent a margin call?
It helps and it does not guarantee it. Several positions can lose at once, stops can slip, markets can gap through them, and the margin requirement itself can rise.
Ready to put this to work?
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Nothing here is financial advice. Leveraged products can lose more than they make.
Other relevant articles
Margin explained: the five numbers on your accountBalance, equity, used margin, free margin and margin level. Every leveraged platform shows all five, most traders watch one of them, and the one most people watch is the one that tells you least.
Risk management: the whole accountSizing one trade correctly is arithmetic. Keeping an account alive across a hundred of them is a different job, and it is mostly about the losing streak you have not had yet.
What is negative balance protection?It stops a trading account from ending below zero and leaving you owing the broker. Whether you have it is not a question about your broker - it is a question about which of its companies opened your account.