How Much Loss Triggers a Margin Call? Calculation Method and 7 Strategies to Avoid Margin Call

What Is a Margin Call and When Does It Happen?

Margin call (is a margin call) is a notification from the exchange informing you that your account is in a dangerous state. Specifically, your open orders are moving against you, and the remaining funds in your account are insufficient to cover those losses. At that point, the exchange will send a notification (via message, email, or phone call) requesting you to add funds to your account or the exchange will automatically close these positions.

A key question many investors ask is: How much loss triggers a margin call? The answer depends on the (margin level) set by the exchange, which varies depending on the platform and asset type.

Understanding Margin (Margin) and Its Operating Mechanism

Margin (margin) is a trading method where investors use borrowed funds from the broker to increase purchasing power beyond their actual funds. You deposit a certain amount as collateral, and the platform adds more to create greater buying capacity.

For example: You have $10 in your account. If the platform offers 1:10 leverage, you can trade with a buying power of $100. Each $1 of your own is a required margin, and the platform adds $90.

The Relationship Between Leverage and Margin Level

Leverage and margin have an inverse relationship:

• Leverage 2:1 = 50% margin
• Leverage 5:1 = 20% margin
• Leverage 10:1 = 10% margin
• Leverage 20:1 = 5% margin
• Leverage 100:1 = 1% margin
• Leverage 200:1 = 0.5% margin

With higher leverage, profits can increase exponentially, but so do risks. If the market moves against you, you can quickly lose your capital.

Maintenance Margin and Margin Level - Two Important Concepts

Besides initial margin (the minimum amount required to deposit), you need maintenance margin — the remaining funds in your account not currently in use, used to cover losses if open trades incur losses.

Margin level (is the ratio between maintenance margin and initial margin). Usually, this level ranges from 50% to 100%, depending on the platform.

When the margin level drops below the safety threshold set by the platform (usually 50%), a margin call will be triggered. At this point, you must deposit more money or close positions immediately to avoid forced liquidation.

How Much Loss Triggers a Margin Call - Calculation Formula

To accurately determine how much loss will trigger a margin call, use the formula:

Margin level = (Account balance / Required margin) × 100%

When the margin level = 50%, a margin call will be activated.

Real-world example:

• You deposit $1,000 into your account
• You open a position with 10:1 leverage, required margin = $100
• Remaining maintenance margin = $900
• You will face a margin call when your loss = $450 (meaning the maintenance margin remaining is $450, margin level = 50%)

7 Effective Strategies to Avoid Margin Calls

1. Add Funds to Your Account

The simplest way is to top up your funds. If you are confident that prices will recover in the short term, deposit more money to increase the maintenance margin. However, if your prediction is wrong, you could lose more.

2. Reduce Trade Size

If your capital is limited, trade smaller lot sizes. This helps reduce margin pressure if the market unexpectedly reverses.

3. Do Not Open Too Many Orders on the Same Asset

Suppose you open 5 small orders on the same forex pair in the same direction — this is similar to opening one large order. Follow the principle: one strategy = one order, avoid stacking multiple orders.

4. Always Use Stop Loss Orders

Stop Loss is your protective tool. When setting a stop loss, you know the maximum acceptable loss, and the order will automatically close when that level is reached. This helps you avoid stress when the platform issues a margin call without knowing what to do.

5. Avoid Trading During Major News Announcements

During releases of important economic data (quarterly reports, interest rate decisions, non-farm payrolls…), the market can be highly volatile and move rapidly. The likelihood of encountering a margin call during these moments is very high.

6. Limit Use of High Leverage

The higher the leverage, the faster your margin level decreases. With 100:1 leverage, a 1% market move can wipe out 100% of your capital. Beginners should start with low leverage (2:1 or 5:1) or avoid leverage altogether.

7. Prepare Sufficient Capital for Highly Volatile Markets

For assets like cryptocurrencies, volatility can be extremely intense. Keep enough funds in your account, open positions with appropriate size, and always have a stop loss in place to protect yourself.

Conclusion

A margin call is not something to fear if you understand how it works. The amount of loss that triggers a margin call depends on the platform’s margin level, usually when it drops to 50% or lower. By applying the 7 strategies above — from capital management to using stop loss, from avoiding high leverage to trading during uncertain times — you can significantly reduce the risk of a margin call and protect your capital. Remember: safe trading is sustainable trading.