Margin Call Explained: What It Is, Why It Happens, and How to Avoid It
By Forexiz Team
A margin call is the market's way of telling you: "You're out of money to cover your losses." If you trade with leverage — and on Forexiz, most traders do — understanding margin calls is not optional. It's survival.
How Margin Works
When you open a leveraged position, the platform sets aside a portion of your balance as "margin" — collateral for the trade. The rest of your balance is "free margin", which acts as a cushion. As the trade moves against you, losses eat into your free margin.
Your "margin level" is calculated as: (Equity ÷ Used Margin) × 100. An equity of $500 and used margin of $100 gives a margin level of 500%. Healthy. An equity of $110 and used margin of $100 gives a margin level of 110%. Dangerous.
What Triggers a Margin Call
When your margin level drops to a critical threshold (typically 50–100%), the platform issues a margin call — a warning that your account is running out of cushion. If your margin level continues to fall and reaches the stop-out level (typically 20–50%), your positions are automatically closed to prevent the account from going negative.
A stop-out is not a choice — it's automatic. The platform closes your positions at market price to protect the remaining balance. This often happens at the worst possible price.
Why Traders Get Margin Called
- Over-leveraging: Using the maximum available leverage on every trade leaves no free margin cushion.
- No Stop Loss: Without a Stop Loss, a losing trade can run until it depletes your entire margin.
- Too many open positions: Each new position uses more margin, reducing your cushion for existing trades.
- Holding through news events: High-impact data releases can cause price to move 100+ pips in seconds.
- Ignoring correlation: Having multiple positions in the same direction on correlated pairs (EUR/USD and GBP/USD) multiplies your effective exposure.
How to Avoid Margin Calls
1. Always use a Stop Loss
This is rule number one. A Stop Loss caps your maximum loss on any trade. On Forexiz, set a Stop Loss on every trade at the moment of entry. No exceptions.
2. Use modest leverage
Just because 200x leverage is available doesn't mean you should use it. For most traders, 10x–50x provides enough exposure without leaving your account vulnerable to minor price swings.
3. Risk only 1–2% per trade
The 2% Rule ensures that no single trade can significantly damage your account. Even 5 consecutive losers at 2% risk only costs you ~10% of your balance.
4. Monitor your margin level
Keep an eye on your margin level in the Forexiz portfolio view. If it drops below 200%, consider closing some positions or adding funds.
5. Don't add to losing positions
"Averaging down" — buying more as price drops — is how margin calls are born. If a trade is going against you, accept the loss and move on. Don't throw good money after bad.
What to Do If You Get a Margin Call
- Close losing positions immediately — free up margin before stop-out forces it.
- Deposit more funds if you have conviction in your remaining positions.
- Reduce position sizes on remaining trades.
- Review what went wrong — over-leverage, no Stop Loss, or news event?
- Adjust your risk management rules to prevent a repeat.
The best margin call is the one that never happens. Use the Forexiz demo account to practice managing margin. Open multiple positions and observe how your margin level changes. Try to deliberately trigger a margin call in demo — understanding the mechanics in practice will make you far more cautious with real money.