What Is a Margin Call — And How to Never Get One
A margin call is one of the most feared events in trading. Understanding exactly what triggers it — and how to prevent it — is non-negotiable knowledge.
Risk Management · July 18, 2026 · 6 min read
A margin call is a demand from your broker to deposit additional funds because your positions have lost enough value that your remaining equity has fallen below the required minimum margin. If you cannot meet the margin call, your broker will start force-closing your positions — usually at the worst possible price. Margin calls are how leveraged traders lose everything in a single trade that goes wrong without a stop loss.
How Margin Works
When you trade on margin, your broker lends you money to control a position larger than your account balance. If you deposit $10,000 with 10:1 leverage, you can control a $100,000 position. Your $10,000 is the margin — the collateral. If the position loses $8,000, your equity is $2,000 (20% of original). If your broker's maintenance margin requirement is 25% of total position value, you receive a margin call because your equity no longer meets the minimum threshold.
What Happens During a Margin Call
When you receive a margin call, you have a limited time window — sometimes minutes, sometimes hours — to either deposit more funds or close positions. If you do not act, your broker closes positions without your input, typically in a disorderly fashion that guarantees the worst fill prices. Brokers have this right because they lent you money that is now at risk.
How to Never Get a Margin Call
One rule eliminates margin calls entirely: never let any open position threaten your margin. This means: (1) Use a hard stop loss on every trade. (2) Size positions so hitting your stop costs no more than 1–2% of your account. (3) Never use the maximum leverage available. (4) Monitor your margin utilization regularly.
The Emotional Trap That Creates Margin Calls
Most margin calls are the predictable result of a specific psychological pattern: a trader ignores a stop loss because they're convinced the trade will turn around, adds to the losing position to 'average down', and the broker force-closes everything at maximum loss. The antidote is mechanical: a stop loss placed before entry, sized correctly, and never moved further away.
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