Margin Call

A margin call is a notification or alert issued by a brokerage firm to a trader when their account's margin level falls to a predetermined percentage set by the broker, typically around 100% or lower depending on the firm's policy.

A margin call indicates that the account's equity has drawn very close to the used margin required for open positions. This signifies that the account has entered a critical danger zone, which may lead to the forced closure of positions if the market continues to move against them.

Upon receiving a margin call, the trader has several options to manage the situation: manually closing some losing positions to free up used margin, depositing additional funds to increase equity, or waiting in hopes of a market recovery while fully acknowledging the associated risk.

A margin call serves as an early warning bell, giving the trader an opportunity to take proactive action before reaching full forced liquidation, which occurs when the margin level drops further to the stop-out level.

A common mistake is ignoring a margin call and continuing to hold losing trades in anticipation of a market reversal, which can ultimately lead to the loss of a significant portion—or all—of the trading capital once the stop-out level is triggered.