A warning, not an execution
The gap between a margin call and a stop-out is fundamental, and most Arabic material blurs it. A margin call is a moment of warning in which every option is still yours: deposit, reduce size, or close voluntarily. A stop-out is the broker's decision, executed on your behalf.
The distance between the two thresholds is usually narrow. In the reference account below it is just $2.40 of gold price — minutes in a volatile market, not hours.
What to do when it happens
There are three options and no fourth, ordered by quality rather than ease:
- Close part of the book — releases held margin and lifts the ratio immediately; this treats the cause.
- Close the losing position entirely — stops the bleeding and converts a floating loss into a bounded, realised one.
- Deposit — raises equity and the ratio, but commits more capital to the very trade that brought you here.
The worst option is waiting for a bounce, because the second threshold is close and the decision there will not be yours. Real prevention comes earlier: a calculated position size and a stop loss placed before entry.
Where this term sits in the account chain
The chain has a fixed order, and each term is derived from the one before it:
Balance → (add the profit or loss of open positions) → equity → (subtract the margin held) → free margin. The ratio of equity to held margin is the margin level, the single number a broker watches to decide a margin call and then a stop-out.
Learn the definitions separately and you know what each word means without knowing the price at which your account closes. Every page in this family runs the same account through the same numbers to reach exactly that price.
The formula
A margin call fires when: margin level ≤ the broker threshold (100% at many brokers)
A worked example
The reference account used across this family: a $1,000 balance, 1:500 leverage, and a 0.10 lot buy on gold at 2,400.00 — 10 ounces, $24,000 notional.
Margin held = 24,000 ÷ 500 = $48. Every $1 of gold price is $10 of profit or loss on 10 ounces.
A 100% margin-call threshold means equity must fall to the held margin itself — to $48. The required loss is 1,000 − 48 = $952, and since each dollar of price is $10, that is a 95.2-point fall: 2,400 − 95.2 = 2,304.80.
Where the same account ends up: margin call at 2,304.80, stop-out at 2,302.40. The position survives a $97.60 fall — about 4% — before the broker intervenes. Run your own numbers in the margin calculator.
Common mistakes with this term
- Confusing a margin call with a stop-out; the first is a warning you still control, the second is broker execution.
- Depositing to rescue a position instead of treating the cause, which puts more capital behind the same risk.
- Assuming there is time to act; the gap between thresholds can be crossed in minutes on a news release.