Margin Calls in Forex
A margin call is a warning from your broker that your account equity has fallen too close to the margin required to hold your open positions. It is not the end — but if you ignore it, stop out is next, and positions get closed automatically. Understanding margin calls is one of the most important risk management concepts in forex.
Margin Call vs Stop Out — The Difference
These are two different thresholds, often confused:
Margin Call Level (e.g., 100%): Your equity = used margin. The broker notifies you. You can still hold positions but need to add funds or reduce size. This is a warning.
Stop Out Level (e.g., 50%): Your equity = 50% of used margin. The broker automatically closes your largest losing position. Then the next largest if the account is still below stop out. Continues until you are above the threshold.
Exness example: Standard account — margin call at 60%, stop out at 0%. So you get a margin call warning at 60%, but positions are only force-closed when equity reaches 0% margin level.
Other brokers: Many use margin call at 100%, stop out at 50%. XM uses 100%/20%. Always check your specific broker's terms in account settings.
How a Margin Call Happens — Step by Step
Scenario: $1,000 account, 1:100 leverage, open 1 standard lot EUR/USD
1. Required margin: $1,000 (100% of account at 1:100)
2. Free margin at open: $0 — account is fully margined
3. Price moves 10 pips against you: loss = $100, equity = $900
4. Free margin: -$100 (already in margin call territory)
This is why opening a position that uses your entire account as margin is an instant margin call scenario. The correct approach: never use more than 10–20% of your account as margin.
Correct sizing: $1,000 account, open 0.1 lot (micro lot):
- Required margin at 1:100: $100 (10% of account)
- Free margin: $900
- Price needs to move 1,000 pips against you before margin call
- At 20 pip stop loss, you lose $20 — 2% of account. Sustainable.
5 Ways to Never Get a Margin Call
1. Use proper lot sizing: Calculate lot size based on your risk (1–2% of account) and stop loss distance, not based on leverage available.
2. Keep free margin above 200%: At any time, your free margin should be at least 2× your used margin. This gives you buffer against adverse moves.
3. Avoid overlapping correlating pairs: Going long EUR/USD AND GBP/USD at the same time doubles your USD exposure. If USD strengthens, both positions lose simultaneously — margin call risk doubles.
4. Never hold high-risk positions through major news: NFP, FOMC, CPI can move 80+ pips in seconds. Stop losses do not protect against gaps. Reduce size before these events.
5. Set a maximum account risk rule: Never have more than 5–10% of account at risk across all open positions simultaneously. This caps potential drawdown even in worst-case scenarios.
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