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10 Sep 2026
What is Forex Leverage? How risky is it?
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10 Sep 2026
What is Forex Leverage? How risky is it?
TrustFinance
Sep 11, 2026
9 min read
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Many people hear the term "margin call" and mistakenly believe it's a deduction or a penalty. In reality, it's purely a warning signal. It's a message indicating that the collateral in your account is becoming insufficient relative to your open positions. If no action is taken, the next step is forced liquidation of orders without consent.
This article explains what margin is, how to calculate margin level, when a margin call occurs, how it differs from a stop out, and how to prevent reaching that point in the first place.
Margin is the collateral that an account must set aside to open and maintain trading positions. It is not a fee or money lost. It is a portion of the account's capital that is temporarily "reserved" as long as the position remains open. Once the position is closed, this money becomes available again.
Used Margin is the portion reserved for currently open positions. Free Margin is the remaining funds available to open new positions immediately. These two combined equal the account's Equity. The more positions opened or the larger the position sizes, the greater the proportion of Used Margin, leaving less Free Margin available.
Margin Level is a number that indicates how sufficient the available collateral is for the open positions. It is calculated as:
Margin Level = (Equity divided by Used Margin) multiplied by 100 percent
Where Equity is the total account value, including unrealized profits and losses, not just the initial deposit. For example, if you have an Equity of $500 and Used Margin of $250, your Margin Level will be 200 percent. If the market moves against you, causing accumulated losses, Equity will decrease, and Margin Level will fall accordingly.
What do different Margin Level percentages mean?
| Margin Level | Account Status | What Happens |
|---|---|---|
| Greater than 150 percent | Safe | Trade normally, can open new positions |
| 100 to 150 percent | Tightening | Some platforms start sending early warnings |
| Around 100 percent (Margin Call) | Called | Warning to deposit funds or reduce positions, still have control |
| Around 50 percent or lower (Stop Out) | Forced Closure | System automatically closes the most losing positions |
The percentage figures in this table are only common values. Each broker sets its own margin call and stop out levels differently. Some brokers set margin call below 100 percent, while others set stop out above 50 percent. It is crucial to always check the actual conditions of the broker you are using and not to assume based on general figures.
A Margin Call is a notification from the system when your Margin Level drops to a pre-defined level set by the broker. Simply put, the available collateral is becoming insufficient to cover the losses of your open positions. If the price continues to move against you without additional deposits or a reduction in position size, your account will approach the point of forced liquidation.
Let's look at an example. Suppose you have 20,000 Baht in your account and open a major currency pair position with a margin of 8,000 Baht, resulting in an initial Margin Level of 250 percent. If the price moves against you, accumulating a floating loss of 12,000 Baht, your Equity will drop to 8,000 Baht, and your Margin Level will fall to exactly 100 percent. This is the point where many brokers start sending a margin call.
The key point is that a margin call is not a punishment; it's a protective mechanism that gives you time to decide before forced action.
These two terms are often used interchangeably, but their meanings are distinctly different.
A Margin Call is a warning; no positions are automatically closed. You still have the choice to deposit more funds, manually close some positions, or do nothing.
A Stop Out is a forced closure. It occurs when the Margin Level drops below a level even lower than the margin call level. The system will automatically close the most losing positions first, without waiting for confirmation, and will continue to close positions until the Margin Level rises back above the stop out level.
Simply put, a margin call is a warning that still grants you the right to decide, while a stop out is the point where that right is lost. If you ignore a margin call for long enough, a stop out is the inevitable outcome.
Leverage and margin are directly linked. The higher the leverage, the less margin is required to open a position of the same size. This sounds like an advantage because it leaves more Free Margin. However, in practice, many traders use that remaining Free Margin to open additional positions or larger positions. The result is that Used Margin returns to a high level, but this time, the total position size is much larger than before.
As position sizes increase, the same price movement generates a larger monetary loss. Consequently, the Margin Level drops faster when the price moves against you. The buffer between your current position and the margin call point thins out progressively with the size of the open positions, not solely based on the leverage figure. More details on this topic are explained in What is Forex Leverage and How Risky is it?
The truly effective method is not to wait for a large deposit to deal with it later, but to plan before opening any positions.
Important Note: Forex trading is not yet licensed or regulated by any agency in Thailand. The Bank of Thailand does not have a policy to issue Forex business licenses to retail investors (Reference: Thai PBS), and the SEC itself confirms that the Forex business is not under the supervision of the SEC but rather under the foreign exchange control law (Reference: The Standard).
This article is provided for general knowledge only, not as personal investment advice, and does not guarantee any returns. Traders should conduct further research and assess risks independently before making any decisions.
What's the difference between a margin call and a stop out?
A margin call is a warning when the margin level drops to a specified level, allowing you to still make your own decisions. A stop out, on the other hand, is an automatic forced closure of positions when the margin level falls even lower, without requiring your consent.
What is a safe margin level?
There is no fixed number that applies to all brokers. However, generally, a margin level above 150 percent is considered to have a sufficient buffer. The closer the number gets to 100 percent, the higher the risk of receiving a warning. You should always check the actual figures used by your own broker.
What should I do after receiving a margin call?
You have two main options: deposit more funds into your account to raise your margin level, or close some positions to reduce your used margin. If you do nothing and the price continues to move against you, your account will eventually reach a stop out.
Does depositing more money actually help?
It helps in the sense that it immediately raises your margin level, but it doesn't address the root cause that led to the margin level dropping in the first place. If your position sizes remain too large for your capital, depositing more money is merely buying time, not a long-term solution.
A Margin Call is a warning signal, not a punishment. It indicates that the collateral in your account is becoming insufficient for your open positions and gives you time to decide before the system forces closure via a Stop Out. What you can truly control is your position size and leverage usage, not waiting to deposit funds when you're about to be called.
Understanding the relationship between margin, leverage, and margin level helps you plan appropriate position sizes from the outset, rather than trying to fix problems when your account is close to a stop out. The cost of holding positions also has other related dimensions, such as swap fees that affect equity every night positions are held overnight (What is a Swap Fee? How to Calculate Overnight Swap Costs), which should be understood concurrently before investing real money.
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