Margin call and stop out
You will see how a small move on EUR/USD can turn a ₱20,000 account into a margin call, and you will work out the exact peso amount that triggers it.
What the chart shows before the warning appears
Open the EUR/USD chart and find the price line near 1.0850. That number is the exchange rate: one euro buys about 1.0850 dollars. If you buy, you profit when the line rises and lose when it falls. The chart does not show your account, your margin, or your broker's thresholds, so you must read those separately.
Below the price line, most platforms plot your equity as a number, not a line. Equity is your balance plus or minus any floating profit or loss on open trades. At the moment you open a trade, equity equals balance because there is no floating result yet. As the price moves against you, the floating loss grows and equity falls, even though your balance has not changed.
The gap between your equity and your required margin is the space you have before the broker acts. Required margin is the deposit your broker locks for the position. It is not a fee and it is not lost; it is held while the trade is open. A margin level of 200% means you have twice the required margin in equity. A level of 100% means equity equals required margin. Below 100%, you have less equity than the deposit the broker requires.
The chart gives you the price. Your platform gives you the equity and the required margin. The two thresholds, margin call and stop out, are set by your broker and shown in the contract specifications. They vary between brokers, so check your own platform rather than assuming a common number.
How a small price move changes your margin level
Suppose you have ₱20,000 in your account and you open a position on EUR/USD that requires ₱10,000 in margin. Your margin level is ₱20,000 divided by ₱10,000, times 100, which is 200%. The price then moves against you. Each pip of loss reduces your equity. If one pip is worth ₱2, a 1,000-pip fall costs ₱2,000 and brings equity to ₱18,000. The margin level becomes 180%.
The margin call level might be 100%. To reach it, equity must fall to ₱10,000. That is a loss of ₱10,000 from the starting equity of ₱20,000. At ₱2 per pip, that is 5,000 pips. On EUR/USD, a 5,000-pip move is large, but leverage makes it possible on a small account if the position size is large relative to the deposit.
The stop out level is lower, often 50%. At 50%, equity must fall to half of required margin, which is ₱5,000. That is a further ₱5,000 loss from the margin call point, or another 2,500 pips. The broker closes positions when the level reaches the stop out, starting with the position losing the most. The exact percentages vary between brokers, so the numbers here are an example, not a rule.
What you can do between the warning and the close
The margin call warning is automatic. It appears on your platform when your margin level touches the margin call percentage. It is not a phone call and it does not mean the broker will act immediately. It means your equity is now equal to the required margin, and any further loss will push you toward the stop out.
You have three choices at that point. You can add funds, which raises equity and lifts the margin level. You can reduce the position size by closing part of the trade, which lowers required margin. Or you can close the trade yourself and accept the loss. Waiting for the market to turn is also a choice, but it is the one that leads to the stop out and a forced close.
The stop out is not a punishment. It is a protection for the broker, because the margin is the broker's collateral. When equity falls below the stop out level, the broker closes positions to prevent the loss from exceeding your deposit. On a small account, a fast move can take you from margin call to stop out before you react. That is why position size matters more than prediction.
When ₱20,000 becomes a margin call
| Step | Amount | Note |
|---|---|---|
| Account balance | ₱20,000 | Your cash, converted from pesos at the rate your broker uses. |
| Position opened | 0.10 standard lots on EUR/USD at 1.0850 | 0.10 lots means 10,000 units of EUR/USD. One pip on one standard lot is 10 units of the quote currency, so one pip on 0.10 lots is 1 unit of the quote currency. |
| Required margin | ₱10,000 | If your broker requires 5% margin, the margin is 5% of the position value. The position value is 10,000 × 1.0850 = 10,850 units of the quote currency, converted to pesos at the current rate. Here we assume that conversion gives ₱10,000. |
| Margin level at open | 200% | Equity ₱20,000 ÷ required margin ₱10,000 × 100. |
| Margin call level | 100% | When equity falls to ₱10,000, the broker warns you. Equity = balance + floating profit or loss. So the floating loss must be ₱10,000. |
| Pips to margin call | 10,000 pips | A floating loss of ₱10,000 divided by ₱1 per pip on 0.10 lots. This is a very large move, so a 0.10 lot position on a ₱20,000 account is not close to a margin call from a small move. |
| Stop out level | 50% | When equity falls to 50% of required margin, the broker closes positions. 50% of ₱10,000 is ₱5,000. |
| Pips to stop out | 15,000 pips | A floating loss of ₱15,000 divided by ₱1 per pip on 0.10 lots. |
| What the broker closes first | The position with the largest floating loss | Brokers usually close the worst-performing position first, then the next worst, until the margin level is back above the stop out level. The order can vary between brokers. |
Your broker may round pip values, charge a spread or commission, and use a different conversion rate for the quote currency. The margin requirement and the stop out level also vary between brokers. Check your own broker's contract specifications.
Doing it once, step by step
In these steps you will calculate your own margin level, find the equity that triggers a margin call, and work out how many pips of loss take you there, using the numbers from the page.
- 01
Write down your equity
Open your platform and find the equity figure. If you have no open trades, equity equals balance. If you have open trades, equity is balance plus or minus floating profit or loss. Write the number in pesos.
- 02
Find your required margin
Look at the margin used for your open position. This is the amount the broker has locked. It is shown in pesos on most platforms. If you have no position, required margin is zero and margin level is not defined.
- 03
Divide equity by required margin
Divide equity by required margin and multiply by 100. For example, ₱30,000 equity and ₱15,000 required margin gives 200%. This is your current margin level. Compare it with the margin call level in your broker's contract specifications.
- 04
Calculate the equity at margin call
Multiply required margin by the margin call percentage. If the level is 100%, equity at margin call equals required margin. If it is 80%, multiply required margin by 0.80. The result is the equity figure that triggers the warning.
- 05
Work out the loss in pips
Subtract the margin call equity from your current equity. That is the loss you can absorb before the warning. Divide it by the pip value of your position. If one pip is worth ₱2 and the loss is ₱15,000, you have 7,500 pips.
- 06
Check the stop out level
Find the stop out percentage in your broker's contract specifications. Multiply required margin by that percentage to get the equity at stop out. The difference between margin call equity and stop out equity is the room you have left after the warning.
The mistake most people make here
Many people think a margin call means the broker will call them on the phone. It does not. It is an automatic warning on your platform. The real mistake is ignoring that warning and hoping the market turns. Instead, check your margin level as soon as the warning appears, and decide whether to add funds, reduce the position size, or close the trade yourself. If you do nothing, the broker will close positions for you at the stop out level, and you may lose more than you planned.Check yourself
You have ₱30,000 equity and a required margin of ₱15,000. What is your margin level?
Margin level = equity ÷ required margin × 100 = ₱30,000 ÷ ₱15,000 × 100 = 200%.
Using the same account, if the margin call level is 100%, what equity triggers the warning?
Equity must fall to 100% of required margin, so equity = ₱15,000. The floating loss needed is ₱30,000 − ₱15,000 = ₱15,000.
If one pip on your position is worth ₱2, how many pips of loss take you from ₱30,000 equity to the ₱15,000 margin call?
Loss needed = ₱15,000. Pips = ₱15,000 ÷ ₱2 per pip = 7,500 pips.
Questions that come up next
What happens to my open positions if I do not add funds?
If you do not add funds and the market keeps moving against you, your equity falls. When it reaches the stop out level, the broker closes positions for you. The broker starts with the position losing the most money. You do not get to choose which one closes first. The remaining positions may also close if the losses continue.
How do I find my broker's margin call and stop out levels?
Open your trading platform and look for the contract specifications for the instrument you trade. The levels are listed there as percentages. They vary between brokers, so you cannot assume a common number. Your platform may also show the current margin level on the account summary. If you cannot find it, ask your broker's customer support.
Can I lose more than the money I put in?
With most brokers, you cannot lose more than your account balance because the stop out closes positions before the balance goes negative. However, if the market gaps suddenly, the stop out may not execute at the exact level, and you could lose more than expected. This is rare but possible. It is one reason to use small position sizes.
What is the difference between balance and equity?
Balance is the money in your account from closed trades and deposits. Equity is balance plus or minus the floating profit or loss on open trades. When you have no open trades, balance and equity are the same. As soon as you open a trade, they can differ. The broker uses equity to calculate your margin level.
How does leverage affect how quickly I reach a margin call?
Leverage lets you open a larger position with a smaller deposit. That larger position has a bigger pip value, so each pip of loss reduces your equity faster. A small price move can then bring you to the margin call level quickly. Lower leverage means smaller positions and slower equity changes. The margin requirement set by your broker also matters.
What should I do when the margin call warning appears?
Check your margin level immediately on your platform. Then decide: add funds to raise equity, reduce your position size by closing part of the trade, or close the whole trade yourself. Doing nothing and hoping for a reversal is the riskiest choice. If you do nothing, the broker will act at the stop out level. You may lose more than you planned.
The words used on this page
- margin level
- A percentage that compares your equity to the required margin. It is calculated as equity divided by required margin, times 100. A higher number means you have more room before the broker acts.
- equity
- The value of your account including any floating profit or loss on open trades. It changes as prices move. The broker uses equity, not balance, to check margin levels.
- required margin
- The amount your broker locks as a deposit when you open a position. It is not a fee and it is returned when you close the trade. It is based on the position size and the margin requirement.
- stop out
- The level at which your broker closes your positions automatically to prevent further losses. It is a lower percentage than the margin call level. The broker starts with the position losing the most money.
- pip
- The smallest standard price move for a currency pair. For EUR/USD, one pip is usually 0.0001. The value of one pip in pesos depends on your position size and the exchange rate.
- floating loss
- A loss on an open trade that has not yet been closed. It reduces your equity but not your balance. It becomes a real loss only when you close the trade.
What to take away
- Margin call and stop out are two automatic thresholds set by your broker, not phone calls.
- Your margin level is equity divided by required margin, times 100. It falls as floating losses grow.
- A small price move can trigger a margin call if your position is large relative to your deposit.
- Check your broker's contract specifications for the exact levels, and act when the warning appears.