Margin Call — Trading Wiki

What Margin Call means

A broker's demand for additional collateral when your account equity falls below the maintenance margin requirement. Failure to meet it triggers forced liquidation.

In depth

A margin call is a demand from a broker or exchange for a trader to deposit additional funds or securities into their margin account when the account's equity falls below the minimum maintenance margin requirement. This mechanism exists to protect the broker from losses that exceed the trader's deposited collateral. When a trader opens a leveraged position, they deposit an initial margin — a percentage of the total position value. As the position moves against them, their equity (account value minus borrowed amount) decreases. Each broker or exchange sets a maintenance margin level — typically 25-30% for equities and varying for crypto — below which a margin call is triggered.

Upon receiving a margin call, the trader has a limited window (often as short as minutes in crypto, or up to a few days in traditional markets) to respond by depositing additional capital, closing some positions to reduce exposure, or transferring additional securities. If the trader fails to meet the margin call, the broker has the right — and typically the automated systems — to liquidate the trader's positions at market price without further consent. This forced liquidation can occur at the worst possible prices, especially during volatile markets when many traders receive margin calls simultaneously.

The cascading effect of simultaneous margin calls across many accounts during a market decline can create the liquidation cascades seen in crypto markets, where forced selling amplifies downward pressure beyond what organic selling alone would produce.

Key points

• Triggered when account equity falls below maintenance margin
• Failure to deposit additional funds results in forced liquidation
• Multiple simultaneous margin calls can amplify market crashes

Practical tip

Set personal alerts at 50% of your margin usage — not at the maintenance level. This gives you time to reduce positions voluntarily at reasonable prices rather than being forced out at the worst possible moment during a volatility spike.

Why it matters when you are learning

A margin call is a warning sign that you've taken on too much risk. Learning to avoid them is essential before using any leverage.

Practising Margin Call on the simulator

Reading about Margin Call and using it are different skills. Try it once in the simulator on an instrument you already follow, write down beforehand what you expect to happen, and check the journal a day later to see whether it played out that way. Educational simulation only — not financial advice.