Balance, equity, margin and free margin
Balance records settled account funds after completed transactions and booked charges. Equity typically adjusts for unrealised trading profit or loss and may include current financing effects. Used margin is collateral assigned to outstanding positions, while free margin is the residual available equity after used margin, subject to the platform’s calculations.
Those definitions explain why a floating loss can reduce margin level even when account balance appears unchanged. If available equity falls sharply while used margin remains significant, the account approaches the broker’s configured warning and liquidation thresholds.
The margin-level formula
In a simplified account, margin level equals equity divided by used margin, multiplied by 100. If a hypothetical account has $800 equity and $400 used margin, the level is 200%. If unrealised losses reduce equity to $240 while margin remains $400, the level falls to 60%.
Colour bar is conceptual. Do not use it as a broker’s liquidation threshold; those vary.
| Hypothetical equity | Used margin | Margin level |
|---|---|---|
| $800 | $400 | 200% |
| $400 | $400 | 100% |
| $240 | $400 | 60% |
| $200 | $400 | 50% |
The table illustrates the calculation. It does not mean every broker sends a warning at 100% or liquidates at 50%, and the actual amount of required margin can change with positions, price and account rules.
What is a margin call?
A margin call is commonly an alert or platform state indicating insufficient margin relative to a provider’s threshold. Historically the phrase could imply a request to deposit funds, but many modern leveraged retail platforms use automated status changes and liquidation rules rather than assuming the trader can act before the threshold is crossed.
Check whether the provider sends notifications, changes trading permissions or merely displays a warning. A trader should not rely on email, mobile push notifications or a support representative reaching them before a fast market move.
What is a stop out?
Stop out is a broker-configured condition at which open positions may be liquidated automatically to reduce further margin shortfall. Exact liquidation order and handling vary. A fast market can jump through thresholds, and closing prices may be worse than the trader expected.
MetaQuotes describes margin call and stop-out parameters as account settings in its MetaTrader 5 tester release notes. For code-level account information, MetaTrader publishes a Stop Out margin setting reference.
Regulatory close-out rules may override marketing examples
In the UK, the FCA’s retail CFD framework includes a margin close-out rule involving 50% of the margin required to maintain open CFD positions and an account-level negative balance protection provision for covered retail customers. That should not be generalised to all global broker affiliates, every instrument or all client classifications. See the FCA’s official explanation.
Some other markets and offshore entities have different percentages, calculation methods or treatment of hedged positions. The relevant legal entity, contract and current margin schedule must be checked before trading.
Margin is not the most you can lose
Margin is collateral supporting a larger market exposure, not a fee and not necessarily a maximum loss. If a broker requires $100 margin for exposure much greater than $100, a modest percentage market movement can create a large change in equity. Gap risk and liquidation mechanics also mean stops and stop-outs should not be treated as guaranteed exit prices.
A broker’s negative balance protection, where applicable, is a separate account-level legal safeguard and does not prevent losses up to the amount in that account. Reviewing leverage without contract size and margin rules can substantially understate the risk of a strategy.
How to research a broker’s trading conditions
- Identify the exact product, legal entity and retail/professional classification.
- Read how margin is calculated for the symbol, including any dynamic margin tiers.
- Record margin-call, stop-out and forced-liquidation conditions from the account documents.
- Check how hedged positions and simultaneous positions affect used margin.
- Stress-test hypothetical adverse price movements instead of planning around a last-minute deposit.
The Compare Brokers tool organises relevant trading-condition fields, but any blank, pending or minimum-basis value needs independent verification. Return to our broker selection checklist to compare regulatory protections and costs alongside leverage terms.
Frequently Asked Questions
Is a margin call the same as a stop out?
No. A margin call typically describes a warning or margin-deficiency state; stop out involves the provider’s forced-liquidation rules.
Does 50% margin level always trigger stop out?
No. Rules vary by provider and jurisdiction, although certain covered retail CFD regimes include specific close-out requirements.
Does lower margin mean lower trading risk?
No. Lower margin for a given position can indicate higher leverage and greater sensitivity of the account equity to market movement.
Editorial and risk notice: Figures are educational assumptions, not current quotes or observed executions. Account conditions and eligibility vary by provider and jurisdiction. Leveraged forex and CFDs carry substantial risk of loss.