Margin call vs stop out — what is the difference?

The question comes back in almost every trading forum thread: "I got a margin call — is there anything I can still do?". The answer depends on whether you are actually talking about a margin call or already about a stop out, because these are two entirely different thresholds, happening at different moments and with different consequences. A margin call is a warning that most often lights up when your margin level reaches 100 percent — the broker is signalling that things are getting tight. A stop out is the forced closing of positions, and at a regulated EU broker it triggers at 50 percent. Below I break both thresholds down and show, on real numbers, when you still have room to act and when the algorithm decides for you.

Everything hinges on one number: margin level

Before we separate margin call from stop out, you need to understand the number both thresholds rest on. It is the margin level — in MetaTrader 5 it sits in the bottom panel, in the Trade tab. The formula is almost trivial, and yet few beginners can reproduce it from memory:

Margin level = (equity ÷ used margin) × 100 percent

Equity is your account balance plus the unrealised result of open positions — how much you really hold this second if everything were closed at the market price. Used margin is the sum of the locks set aside for each open position. If the relationship between those two numbers shows 1,000 percent, you have a tenfold buffer and you sleep well. At 200 percent it starts to feel tight. At 100 percent equity has drawn level with the lock — and this is exactly where the margin call speaks up. I unpack the mechanics of that calculation in more depth in the piece on the difference between balance, equity and used margin, because confusing those three concepts is the most common reason people panic at the wrong moment.

Margin call — a warning, not a verdict

A margin call is a signal, not the closing of your account. At most regulated EU brokers the threshold is set at 100 percent, though you should always check the terms yourself — I have seen 80 and 120 percent as well. As an unrealised loss grows, equity shrinks and the margin level slides toward the threshold. The moment it touches it, the platform highlights your positions in red and blocks the opening of new ones. Crucially, the broker does not touch your existing positions at this point.

This is the whole point of the margin call — it is meant to give you time to react before price reaches the stop-out threshold. In practice you have three moves to choose from. You can deposit additional funds, which lifts equity and pushes the danger away. You can close part of your positions manually, reducing used margin. You can also move your protective orders and cap the further loss. A margin call is a red light at the junction, not the collision itself — its entire value lies in arriving early.

Stop out — when the algorithm takes over

A stop out is the forced closing of positions by the broker, regardless of your wishes. The EU threshold is 50 percent of the margin level, and that figure is not arbitrary — it comes from the 2018 ESMA decision, which standardised the margin close-out rule at half of the minimum required margin. At non-EU brokers that threshold is often far lower, sometimes 20 percent, and in extreme offshore models even zero, meaning a position is held until equity is wiped out entirely.

The mechanics are sequential. When the margin level touches the threshold, the broker closes positions starting from the most loss-making one. After the first is closed, equity and used margin change, so the margin level rises immediately. The algorithm checks again: if you are still below the threshold, it closes the next one; if you have regained a buffer, it stops. That is why after a stop out you are often left with one or two open positions rather than a clean zero. The difference between the margin requirement itself and the leverage that sets that requirement I cover separately in the piece on how leverage differs from margin.

"The rules for limiting risks are as vital to a trader as a safety net is to a high-wire walker." — Alexander Elder, Trading for a Living, Wiley, 1993.

Why a stop out sometimes fails to save the account

A stop out works automatically, but it rests on a quiet assumption — that the broker has the liquidity to close your position at a price close to the market. That assumption can fail. The first scenario is a weekend gap: the market reopens on Sunday evening and price can "jump over" the 50 percent threshold. The stop out then triggers only at the first executable quote, and that may correspond to a far deeper loss than the threshold implied.

The second scenario is a black swan. On 15 January 2015 the Swiss National Bank scrapped its currency floor and EUR/CHF collapsed by double digits within minutes. Brokers closed positions at prices dramatically worse than the last quote, because there were simply no buyers on the other side. The third scenario is quieter: a small or offshore broker with shallow market depth executes the stop out with heavy slippage, even without a global shock. In each of those three cases only one thing protects you from a negative account — negative balance protection.

Negative balance protection — the last line of defence

Negative balance protection is the rule that a broker cannot demand more from you than you deposited into the account. For retail clients in the EU it has been mandatory since 1 August 2018, under the same ESMA decision that introduced the stop-out threshold and capped leverage at 1:30 on major pairs. In practice it means that even in a catastrophe like the Swiss franc in 2015, your account can drop to zero but will not go below it.

There is a catch, though, and it is easy to forget. This protection applies only to retail clients. The moment you switch to professional client status — to gain higher leverage — you lose it automatically. That is why I keep repeating to readers: the higher leverage of a professional account is rarely worth the loss of that shield. It is no accident that ESMA requires brokers to carry a warning that depending on the provider, between 74 and 89 percent of retail accounts lose money, with the average loss running into thousands of euros per client.

The most common mistakes at both thresholds

The first and most dangerous is treating margin call and stop out as synonyms. A trader who has only heard of the "margin call" panics at 100 percent or, worse, relaxes — thinking that since a warning arrived, the broker will somehow close the position "if need be" without a loss. In reality, between the warning and the forced close lies a whole stretch in which the account melts away.

The second mistake is betting on the market's return instead of cutting the loss. Statistically, a position dragging an account toward a margin call most often has one more strong push the wrong way ahead of it. The third is trading without a protective order — without a stop loss, a margin call is one unexpected macro release away from a stop out. The fourth, finally, is the belief that negative balance protection is permanent; on a professional account it disappears, and a price gap can then generate a real debt to the broker.

What to do before you close this page

1. Check your stop-out threshold in the broker's terms. Go to your broker's website, find the trading conditions document and write down two numbers: the margin call level and the stop-out level. If the broker is outside the EU and the stop-out threshold is below 50 percent, treat that as a warning sign when judging how safe the account is.
2. Calculate your margin level for a typical position. Open MetaTrader, enter the position size you usually trade and read off the used margin. Divide your equity by it and multiply by one hundred. If the starting result is below 500 percent, you are trading too large a position relative to the account.
3. Set a stop loss on every open position today. Go through your list of open trades and for each one that has no protective order, add it now. It is the single action that pushes you furthest from the margin-call threshold.
4. Verify your client status. Log in to your broker's panel and check whether you hold retail or professional status. If you once raised your leverage by switching to professional, make sure you understand that you gave up negative balance protection. For a deeper technical treatment of these margin concepts, see the risk management section on ForexMechanics.
5. Size your positions by the one-percent rule. Before you open the next trade, work it out so that you risk no more than one percent of your equity — the position-sizing formula will automatically keep your margin level well clear of the thresholds, even after several losing trades in a row.