Forex margin call: How to Calculate Margin for Forex Trades


In this case, the used margin will be $3,000 while $2,000 will remain as a free margin. In total, you will still have $5,000 available equity on your account because the trade hasn’t started and payouts/losses haven’t occurred yet. The elements we discussed above are necessary to keep track of the account balance and make sure that nothing unexpected happens. However, no trader can be certain that the currency prices don’t fall and their account balance doesn’t reduce. For leverage to work in your favour as a trader you need to be profitable overall – if you are, leverage will enhance your profits, if you’re loss-making then leverage enhances losses. Taking the time to learn the skills needed to trade becomes even more important.


A margin call typically indicates that assets contained in a margin account have dropped in value. When this happens, an investor can opt to add more funds or securities or choose to sell some of the account’s assets, effectively closing any open positions. At all times, you should have enough funds in your margin account to cover all your trading positions. In other words, your equity needs to always cover 100% of the margin.

In case we couldn’t get through, we will try again at the same the next day. Full BioSuzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands. Full BioMichael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics. Kesavan Balasubramaniam is a freelance writer who covers a wide array of investing topics, including retirement, FX trading, and small business. IG International Limited is part of the IG Group and its ultimate parent company is IG Group Holdings Plc.

Credit limit or maintenance margin

You can place this at a percentage above or below the current market price. Of retail investor accounts lose money when trading CFDs with this provider. But if the sum of your trades puts you in a loss-making position, that total must be higher than what is covered by the money in your account.

forex brokers

Margin calculations in forex are a deposit that a trader puts up in order to secure a position. Think of it as collateral—it’s not a fee or a cost, but it ensures that your account can handle whatever trades you are making. If you get a margin closeout, remember that it’s not the end of the world. Look back on your trading history and analyse what you can change to prevent a closeout in the future. If you fail to respond to a margin call or, despite topping up your overall margin, your positions continue to worsen and your overall margin reaches 50%, your broker will begin a closeout.

Your global trading connection

Then we have below 100%, where traders cannot even maintain the existing positions. At this point, your positions become at risk of being automatically closed in order to reduce the margin requirement on your account. You will then owe money to your broker if it doesn’t offer negative balance protection.

  • In this case, you will receive a warning from your broker that you need to close your trade or deposit more money to meet the minimum margin requirement.
  • Control of the equity level on the trading account is one of the obligatory rules of risk management and must be suggested by any trading plan.
  • The swap is subtracted from the trader’s own funds, thus speeding up the deposit decreasing.
  • High leverage means your margin call won’t come as quickly, but as a result, you’ll lose more money.
  • The maximum leverage that can be used with your trading account can be calculated based on the margin required by your broker.

Our forex margin calculator will help you calculate the exact margin needed to open your trading position. And if your drops below 100% of the minimum requirement to trade the position is closed without any warnings. You should consider whether you understand how ᏟᖴᎠs work and whether you can afford to take the high risk of losing your money.

Trading with added confidence

A margin call is usually an indicator that securities held in the margin account have decreased in value. When a margin call occurs, the investor must choose to either deposit additional funds or marginable securities in the account or sell some of the assets held in their account. To avoid getting a margin call and/or hitting astop-out level, you should only trade what you can afford. Manage your money in a rational manner; only use leverage if it makes sense for you to do so. A lot of profitable traders — most actually — only trade about 2.5–5% of their own equity.

Unlike cash accounts, margin accounts allow you to use borrowed money to open and hold financial positions. Opening a trade with too much margin can quickly lead to a margin call. Opening a trade with insufficient margin could lead to a profitable trade which has little impact on your trading account. Therefore, the margin required should be somewhere in between and according to your risk appetite. Margined trading is available across a range of investment options and products. One can take a position across a wide variety of asset classes, including forex, stocks, indices, commodities and bonds.

Managing the Margin level of the deposit enables you to predict at what quotes of the pair for a given lot volume a Forex stop out can occur. Knowing averaged volatility data, you can build an individual forex trading strategy of boosting position size according to the price changing rate and in accordance with the level of leverage. The simplest version of such a table can be created in Excel. Understanding margin and leverage connections are crucial for comprehending a forex margin call.

While it can give investors more bang for their buck, there are downsides. For one, it’s only an advantage if your securities increase enough to repay the margin loan . Another headache can be the margin calls for funds that investors must meet. Here’s an example of how a change in the value of a margin account decreases an investor’s equity to a level where a broker must issue a margin call. Brokers may force a trader to sell assets, regardless of the market price, to meet the margin call if the trader doesn’t deposit funds. Margin calls are demands for additional capital or securities to bring a margin account up to the maintenance requirement.

The amount of margin is usually a percentage of the size of the forex positions and will vary by forex broker. Discover IG’s margin requirements and margin call procedure. The term margin call came from the practice of brokers calling their clients to notify them of the account deficit.

Imagine a situation where someone could borrow hundreds of thousands or millions of dollars to invest in a company. If that company’s share price dropped by just a few dollars, that investor could easily lose more money than they have. This could leave investors bankrupt and brokers losing large amounts of money. Margin requirements limit how much investors can borrow, and set requirements for the equity they must maintain after buying securities with margin.

You should, however, note that a stop-loss order only gets triggered at the pre-set level, but is executed at the next price level available. For example, if the market is gapping, the trade gets stopped out with the position closed at a less favourable level than that pre-set. When you receive a margin call, you should not ignore it and do nothing.

The systems are carefully pit bull lessons from wall street’s champion day trader, often with a maximum leverage ratio set by regulators. The problem is that if the shares fall 20%, you’ve made a £20,000 loss, plus interest on the £50,000 borrowed and the transaction fees. That’s the danger with margin – you can reap huge rewards but face equally large losses. You can use margin to trade most asset classes such as equities and CFDs. A Stop Out is the act of closing, or liquidating, your positions.

  • You likely won’t be able to buy any more securities until you meet the margin call requirements.
  • In the example above, a 5 lot position has been opened and the margin level is currently over 2000%.
  • Trade your opinion of the world’s largest markets with low spreads and enhanced execution.
  • The trader’s mistake was simple, he didn’t take into account the cost of arbitrage trading .

Margin Call and Stop Out are the standard trading conditions that must be specified in the account general information provided by forex brokers. On the one hand, by using leverage, even from a relatively small initial investment you can make considerable profit. On the other hand, your losses can also become drastic if you fail to apply proper risk management. Please note that margin calculations are done per instrument traded. So, when a client has open positions on multiple instruments, the margin is calculated separately for each position. XM sets high standards to its services because quality is just as decisive for us as for our clients.

A more detailed calculation of the stop out level in Excel will be given below. The website is operated and provides content by HF Markets Ltd. No HE with registered and office address at Spyrou Kyprianou 50, Irida 3 Tower 10th Floor, Larnaca 6057, Cyprus.


A total amount of funds on the account balance is called the available equity, while the money taken by a broker is called used leverage. These two elements and a margin level calculated by using them enable traders to see whether their funds are sufficient to open a new trade or maintain the old ones. This is called the margin call level – a point where the margin call is issued. If a trader fails to close positions or deposit funds to their account, the broker will be able to liquidate the trader’s positions. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors.

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Cash investment accounts may come with additional restrictions, however. For example, you can’t buy and sell a security before paying for it. Let’s say John wants to invest in XYZ Company, which is trading at $100 per share. John has $50,000 to invest and wants to buy as many shares as possible. Using margin, he can buy 1,000 shares with his own money and $50,000 on margin from his broker. The investor must respond to the margin call by selling shares or depositing funds to avoid forced sale of their investments.

A margin call occurs when a margin account runs low on funds, usually because of a losing trade. Unlike other forms of borrowing, a trader isn’t charged an interest for using a loan in the common form. Each broker charges a swap – a fee for keeping a position open overnight that is accrued for all positions opened, including those that engage borrowed funds. The swap is subtracted from the trader’s own funds, thus speeding up the deposit decreasing. Liquidity providers are investment banks whose liquidity is confirmed by the investors’ deposits. If this source was obvious, brokers wouldn’t conceal it, but the mechanism of providing the leverage is not revealed.

This reduces the amount of risk taken on by a broker, which is higher when market prices rapidly decline. Margin call is a warning from a broker, which occurs when the value of your margin account falls below the maintenance margin requirement. It allows you to open larger positions and trade assets you otherwise could not afford. Whether margin trading is a suitable option for you will depend on your risk tolerance and trading goals. By definition, leverage trading means small or modest market movements can result in significant profits and losses. In particularly volatile markets the price can move sharply.

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