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Market Basics

What Is a Margin Call

A margin call is your broker's warning that the account no longer comfortably covers what it is holding. This paper shows you what the message is, the percentage that triggers it, how that percentage turns into a distance in pips at four sizes, how the level moves through one real day until the call arrives, and where to read the percentage on your own platform.

Difficulty
Beginner
Reading time
7 min
Pages
8
Reviewed by
Saman Rahbar

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The message

A margin call is a message from your broker saying the account no longer comfortably covers what it is holding. It is a warning rather than a closure — nothing has been shut yet — and it asks you to add money or close something. By the end of this paper you will know what triggers it, how it turns into a distance in pips — a pip is the fourth decimal place of the price, the smallest step most people count in — how it arrived on one real day, and where the number behind it sits on your own screen.

The thing that triggers it is a single percentage. Take what the account is worth right now, including the profit or loss on everything open — that is the equity — and divide it by what your positions have locked away, the used margin. Multiply by a hundred and that is your margin level. It starts high and falls as trades go against you. Brokers draw a line across it, commonly at 100, and send the call when it is crossed. At 100 the account is worth exactly what its positions have locked. Yours may be at 80 or 50; it is in the account terms.

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