A number reveals the truth about leveraged trading—Understanding Margin Call and Margin Level

The “Critical Point” in Leverage Trading

When you trade forex or derivatives with leverage, the platform isn’t giving you money for free. Once your position incurs losses beyond a certain point, the margin (your own invested funds) rapidly shrinks. When this margin falls below the platform’s minimum requirement, you will receive a margin call notification—meaning the platform is warning you: either add funds immediately or I will forcibly close your position.

In simple terms, a margin call is a notice issued by the broker when a trader’s account margin becomes insufficient due to position losses. This is the most dangerous red line in leveraged trading.

Margin Level: The Deadly Threshold Behind the Numbers

The margin level is expressed as a percentage—it reflects how much “trading space” you still have. The calculation is straightforward:

Margin Level = (Account Equity ÷ Used Margin) × 100%

Where:

• Account Equity = Cash Balance + Unrealized Profit (or - Unrealized Loss)
• Used Margin = Total margin occupied by all open positions

Understanding this logic with an example:

You have a $1,000 account and buy 1 mini lot of EUR/USD (requiring $200 margin). At this point:

• Margin Level = (1000 ÷ 200) × 100% = 500%

You’re still very safe. But if EUR/USD suddenly drops sharply and your floating loss reaches $800, your account equity drops to $200:

• Margin Level = (200 ÷ 200) × 100% = 100%

When the margin level drops to 100%, the platform will freeze your ability to open new positions. If the price continues to fall to the platform’s set stop-loss level (usually 20%–50%), the platform will forcibly close your positions, leaving you with nothing.

Why Does a Margin Call Occur?

Margin calls happen in three situations:

1. Single position loss is too large — You bet wrong or set improper stop-loss, and losses consume your margin.
2. Multiple positions are losing simultaneously — Lack of diversification causes multiple positions to fall together.
3. Leverage is too high — Using 10x, 20x leverage, a small fluctuation can trigger a liquidation.

How to Survive in Leverage Trading?

Step 1: Set a Stop-Loss—Better Small Losses Than Big Losses

A stop-loss order is your safety helmet. When the price hits your set level, the system automatically closes the position, locking in losses within a controllable range. Trading with leverage without a stop-loss is like walking on a cliff—losses are unlimited.

Step 2: Choose an Appropriate Leverage

5x leverage is 100 times safer than 20x. The higher the leverage, the faster the margin level drops. For beginners, 3–5x leverage is sufficient; focus on choosing the correct trading direction.

Step 3: Diversify Your Portfolio

Don’t put all your funds into one currency pair. Spread your margin across different trading instruments (EUR/USD, gold, oil, etc.). Even if one position loses, gains from others can balance overall risk.

Step 4: Regularly Check Your Margin Level

Monitor your margin level on your trading platform at all times. Once it approaches 100%, take immediate action—add funds or close positions proactively. Don’t rely on the platform’s goodwill.

The Bottom Line

A margin call is not an abrupt attack; it’s a gradual warning process. The margin level from 500% → 100% → triggering stop-loss gives you opportunities to react. True experts are not those who never lose, but those who run away before losses become unmanageable. Leverage is a double-edged sword—learning to tame it is key to surviving longer in trading.