EducationFoundations~14 min readUpdated 26 September 2026
The short answer
A margin call is the broker's warning that your equity is approaching the amount of margin locked up. A stop-out is the broker closing positions by force because equity has fallen below a threshold. Both are measured on margin level = (equity ÷ used margin) × 100. Typical thresholds: margin call at 100%, stop-out at 50%. But they vary widely by broker — from Exness's 60%/0% to Pepperstone's 90%/50%. If you never see one, you were never actually oversizing positions.
Why this is the safety net you should never need
The margin call and the stop-out exist to protect the broker, not the trader. By the time either fires, the trade is already lost and the broker is covering itself against your balance going negative. Every trader who has ever blown an account has seen a stop-out. Every trader who has traded for a decade has not.
This lesson is about understanding the mechanism so well that it never fires on your account.
T
Written by the Trade To The Top team|Reviewed 26 September 2026
Margin level rules and stop-out thresholds verified against IC Markets, Pepperstone, FP Markets, Exness, XM, and Capital.com published client agreements and product disclosure statements as of August 2026.
A margin call is not a phone call from your broker asking for money. It is a number crossing a threshold. A stop-out is not a courtesy — it is the broker closing your trade for you, at whatever price the market is at that moment. Both are silent, automatic, and final. Knowing how they fire is the difference between controlling the risk and having the risk control you.
Key takeaways
Margin level = (equity ÷ used margin) × 100. It is the only number the broker watches for liquidation.
A margin call is the broker's warning that your equity has fallen to the level of the margin locked up by open positions. It is calculated as a percentage:
MARGIN LEVEL =EQUITYUSED MARGIN× 100
Where EQUITY = Balance + floating P&L on open positions. Where USED MARGIN = the sum of margin locked by every open trade.
At 100%, equity exactly equals used margin. That is the moment the broker considers the account to be running out of room. Most brokers mark it as the margin call level and send a notification through the platform. It does not close anything. It just flags the account for the next stage.
At 100%, you cannot open new trades. Free margin is zero. Every dollar of the account is committed to holding the current positions open. If the market moves further against you, the next number is the stop-out.
MARGIN LEVEL · FOUR ZONES
Healthy above 500% · Warning at 200% · Margin call at 100% · Stop-out at 50%
Below 500% is where the risk math starts to matter. Below 100% is the territory of the margin call. Below 50% is where positions get closed for you.
Everything above 500% is comfortable. That is where a properly sized account sits, because the risk math from Lesson 2 keeps margin locked to a fraction of equity. Below 100% is where the trader is out of room, and below 50% is where the broker takes control.
Broker
Margin Call
Stop-Out
Platform Notes
IC Markets
100%
50%
Standard for MT4/5
Pepperstone (MT4/5)
90%
50%
Professional clients: 20%
Pepperstone (cTrader)
150% / 100% / 80%
50%
Smart Stop-Out (partial close)
FP Markets
100%
50%
Worst-loss-first liquidation
XM
50%
20%
Both Standard and Zero accounts
Exness
60%
0%
No stop-out; account can reach zero
FBS
40%
20%
Lower thresholds for higher risk tolerance
HYCM
50%
30%
Standard retail configuration
That table is not a comparison to pick the "safest" broker from. It is a reminder that the same account at the same lot size can behave differently depending on where it is held. A trader with a 1:500 leverage account at Exness will see a very different liquidation event than a trader with the same trade at XM. Read the client agreement for your own account before you open a position.
What a stop-out is
A stop-out is the broker's forced liquidation of open positions. When margin level falls below the stop-out threshold, the broker begins closing trades automatically. No warning call reaches you in time. No confirmation is required. The trades close at whatever price the market is at that moment.
This is where Lesson 5 matters. A stop-out does not execute at the threshold price. It executes at market. If you are stopped out during a news spike, the fill can be far worse than the level that triggered the close. The slippage that was already working against the trade compounds the loss one more time on the way out.
The stop-out does not close the trade at the price you wanted. It closes the trade at the price the market gives.
Terminal — Trade
Balance
$5,000.00
Equity
$2,720.00
Used margin
$2,715.00
Free margin
$5.00
Margin level
100.18%
Open position: 1.25 lots EURUSD long at 1.0850 · floating loss −$2,280. Margin level = (2,720.00 ÷ 2,715.00) × 100 = 100.18%. Margin call level reached. Next move down triggers the stop-out.
This account is one small move from a forced close. The trader did not blow up the account in a single trade — they opened 1.25 lots on a $5,000 account, which is roughly 25 times the size that a 1% risk rule would allow. The margin call is not the cause. It is the symptom of sizing the trade to the leverage instead of the risk budget.
MARGIN LEVEL · FALLING THROUGH BOTH THRESHOLDS
EURUSD 4H price above · the account's margin level below
At 100% the broker warns. At 50% it closes the position for you, at whatever price is there.
How positions get liquidated
When a stop-out fires, the broker does not close every position at once. It closes the largest loser first, then recalculates margin level. If the level is still below the threshold, it closes the next-largest loser. This repeats until margin level rises above the stop-out threshold or all positions are closed.
Liquidation order · typical broker behaviour
01
Largest losing positionBiggest floating loss is closed first
CLOSE FIRST
02
Re-check margin levelIf still below threshold, keep going
RE-EVALUATE
03
Next largest loserRepeat the process until level is above threshold
CLOSE NEXT
04
Winning positions closed lastOnly if the losers are not enough
CLOSE LAST
Exact liquidation order varies by broker. Some close the most recent position first. Some close proportionally across all open trades. The client agreement always states the order used.
Two consequences of this mechanism matter. First, the trader does not get to choose which positions survive. Second, positions can be closed while they are still technically valid — a winning trade can be liquidated to save a losing one. The broker is not protecting the strategy, only the account balance.
Smart Stop-Out
Some platforms use a different liquidation mechanism called Smart Stop-Out. Instead of closing an entire position, the broker closes part of the position — enough to free up margin and push the margin level back above the threshold. The remainder stays open. This is the default on cTrader and TradingView, and Pepperstone uses it on its cTrader accounts.
For example, if you have a 1.00-lot position and margin level falls to 50%, a Smart Stop-Out might close 0.40 lots, leaving 0.60 lots open. If the market recovers, the remaining 0.60 lots can still profit. If the market keeps falling, the Smart Stop-Out fires again and closes another portion.
Smart Stop-Out is not strictly better than full liquidation. It gives the trade a chance to recover, but it also realises losses in stages, which can make the total loss harder to track. And it does not protect against a gap — a single large gap can still take the entire remaining position out at once.
A Smart Stop-Out does not save the trade. It buys the trade time.
Negative balance protection
Under ESMA rules (EU), FCA rules (UK), and ASIC rules (Australia), retail clients cannot lose more than they deposited. If a market gap pushes an account below zero, the broker must restore the balance to zero. This is called negative balance protection, and it is mandatory for retail clients in those jurisdictions.
How NBP was born — the January 2015 Swiss franc shock
On 15 January 2015, the Swiss National Bank removed the EUR/CHF floor without warning. The pair gapped 20–30% in minutes. Stops were useless — they executed hundreds of pips below their trigger levels. Thousands of retail accounts went deeply negative, and brokers attempted to collect the residual debt from clients. Several brokers (Alpari UK, FXCM) became insolvent themselves when client losses exceeded their capital.
ESMA's response, formalised in 2018, was to mandate negative balance protection for all retail accounts across the EU. The FCA matched the rule for the UK. ASIC followed for Australia. The rule shifts the catastrophic-tail risk from the retail trader to the broker, which forces brokers to underwrite the risk and price it into their products.
NBP is not universal. Three cases where it does not apply:
Professional clients — traders who opt into professional classification (usually by meeting experience and capital requirements) lose the protection. They can end up owing the broker money. The waiver is signed at account upgrade.
Offshore accounts — brokers registered in jurisdictions without NBP rules are not required to restore negative balances. Some do voluntarily. Many do not. SVG, Vanuatu, and Seychelles do not require it, and offshore broker T&Cs typically reserve the right to bill clients for negative balances.
Prop firm challenges — most do not provide negative balance protection. Traders who blow the daily drawdown are simply done. Traders who blow past zero owe the firm.
Common mistake
Assuming negative balance protection exists everywhere. A weekend gap on a full-size position can put a leveraged account deeply negative before the broker can close it. If the account is classified as professional, or held offshore, the trader owes the difference. For accounts that size trades correctly, this scenario cannot occur. For accounts that trade at maximum leverage, it is only a matter of time.
How to never see one
The margin call and stop-out are preventable outcomes. Two rules eliminate them entirely.
Risk a fixed percentage per trade. A 1% risk trade cannot move the margin level more than a few percent in any realistic scenario. The math from Lesson 2 was built for this. If every trade risks 1% and the account can survive a 10-trade losing streak, the margin level never gets near 100%.
Ignore the maximum leverage your broker offers. The maximum leverage is not a suggestion for trade size. It is the broker's protection threshold, not the trader's. A broker offering 1:500 does not expect the trader to trade 1:500. It expects the trader to trade 1:30 and stop complaining about margin requirements.
Here is the same $5,000 account, sized two ways:
✓ Sized to 1% risk
Account$5,000
Risk per trade1% = $50
Stop distance20 pips
Lot size0.25 lots
Margin locked~$271
Margin level after open~1,844%
NO CALLneeds −1,800 pips to trigger
✗ Sized to maximum leverage
Account$5,000
Risk per trade25% = $1,250
Stop distance20 pips
Lot size6.25 lots
Margin locked~$6,781
Margin level after open~74%
CALL ON OPENbefore the trade even moves
The trader on the right cannot even open the position without immediately triggering a margin call. The margin locked exceeds equity. This is not a hypothetical — it is what happens when the trader reads "maximum leverage 1:500" as an instruction instead of a limit.
To reach 100% (margin call level):
Equity must fall to 271
Loss required = 5,000 − 271 = $4,730= 946 LOSING TRADES IN A ROW
A correctly sized account cannot produce a margin call. The math simply does not permit it. Every margin call in history is the result of a trader who sized the position to the leverage instead of the risk. The call is the mechanism working as designed — it is the account that failed.
ONE PERCENT AGAINST TWENTY PERCENT
Identical price · two position sizes · where the stop-out sits in each
The correctly sized account has hundreds of pips of room. The oversized one has twenty-two.
When this fails
Four situations break the standard assumptions:
When this fails
Weekend gaps. Markets gap over the weekend when news breaks. A position that is 20 pips from the stop-out level on Friday can be 200 pips past it on Monday open. The broker closes the trade at the new price, not the threshold. Negative balance protection matters here — if the account is retail in a regulated jurisdiction, the broker must restore it to zero.
Stop-out thresholds vary dramatically by broker. IC Markets and FP Markets use 50%. XM uses 20%. Exness uses 0% (no stop-out at all, the account just runs to zero). Pepperstone uses 50% for retail MT4/5 but 20% for professional clients. The client agreement is the only reliable source. Assuming 50% when the broker uses 20% or 0% changes the entire risk calculus.
Liquidation order varies. Most brokers close the largest loser first, but the exact order is broker-specific. Some close by position age, some proportionally, some by margin efficiency. If the trader has hedged positions open, the liquidation sequence can produce losses that were never individually intended.
Smart Stop-Out changes the math. On cTrader and TradingView, the broker may close part of a position rather than the whole thing. This keeps the trade alive but realises losses in stages. The total loss can end up larger than a full liquidation would have produced, because the remaining position continues to bleed.
If you remember nothing else: the margin call is a warning, the stop-out is a forced close, and both are avoidable by sizing the trade to the risk budget instead of the leverage.
In one box
Margin level = (equity ÷ used margin) × 100. This is the only number that triggers a call or stop-out.
Margin call at 100% (typical). Warning only. No new trades allowed.
Stop-out at 50% (typical). Forced close at market. Slippage can make it worse.
Liquidation order: largest loser first, then recalculate, then next.
Smart Stop-Out closes part of a position on cTrader/TradingView instead of the whole thing.
Negative balance protection is mandatory for retail clients in ESMA/FCA/ASIC. Not universal.
Sized to 1% risk, a $5,000 account needs ~950 losses in a row to trigger a margin call.
Check before you trade. Our lot size calculator shows the margin that would be locked at your chosen lot size, so you can see the margin level before the position even opens.
5 questions · immediate feedback · retake any time
Question 01 of 05
What does margin level measure?
Correct: B. Margin level = (equity ÷ used margin) × 100. This is the number the broker uses to decide when to warn and when to liquidate.
Question 02 of 05
At what margin level does a typical stop-out fire?
Correct: C. Most brokers use 50% as the stop-out threshold. But it varies: XM uses 20%, Exness uses 0%, FBS uses 20%, HYCM uses 30%. Always check your own broker's client agreement.
Question 03 of 05
Which position does the broker typically close first during a stop-out?
Correct: B. Most brokers close the largest loser first, then re-check margin level, then close the next-largest loser if needed. The exact order is disclosed in the client agreement.
Question 04 of 05
What is negative balance protection?
Correct: C. NBP restores a negative balance to zero for retail clients in regulated jurisdictions (ESMA, FCA, ASIC). Professional clients and offshore accounts are often not protected.
Question 05 of 05
A trader with a $5,000 account risks 1% per trade with a 20-pip stop, trading 0.25 lots. How many consecutive losing trades would be needed to trigger a margin call?
Correct: A. With 0.25 lots at $50 loss per trade, the account would need to lose $4,730 to reach 100% margin level. That is 946 consecutive losses. Correct sizing cannot produce a margin call.