Why a ratio rather than an amount
A broker does not care how many dollars you have lost; it cares whether enough equity remains to cover the margin held. Hence a ratio: equity ÷ held margin × 100.
That explains a paradox many find confusing: an account down $900 can be safer than one down $200, if the first holds little margin and the second holds a great deal. The absolute loss decides nothing; the ratio decides everything.
What each level means
How to read the ratio in practice, noting that thresholds differ between brokers and must be confirmed in your account terms:
- Above 1000% — held margin is tiny relative to the account; plenty of room.
- 300%–500% — a comfortable zone many traders deliberately target.
- Approaching 100% — equity nearly equals held margin; this is where many brokers issue a margin call.
- At the stop-out threshold — forced closure begins automatically, without waiting for your decision.
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
Margin level = (equity ÷ margin held) × 100
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.
At 2,400 margin level is (1,000 ÷ 48) × 100 ≈ 2,083%. At 2,350 equity becomes 500 and the level falls to (500 ÷ 48) × 100 ≈ 1,042% — exactly halved, because the held margin did not change.
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
- Watching the dollar loss instead of the ratio, when the broker decides only on the ratio.
- Assuming 100% and 50% are universal; thresholds vary by broker and account type.
- Forgetting that opening a new position raises held margin and therefore drops margin level immediately, with no loss at all.