Do you know about Margin Call? Why does recovering the margin cause retail investors' mentality to explode?

What Exactly Is a Margin Call?

You’ve probably heard the term “margin call.” Simply put, margin call (the full Chinese term is margin recovery) occurs when you’re trading with leverage and your account loses enough to trigger a notification from the platform: “Bro, your funds aren’t enough to maintain this position. You need to close it yourself or add more funds.”

It sounds simple, but here’s what’s really happening: when your position’s loss exceeds the margin you’ve deposited, your account net value decreases. Once this value drops below the platform’s required margin, you’ll receive a “margin call” notification. At this point, you have two options—voluntarily close your position or quickly add funds. Otherwise? The platform will automatically close your position to prevent further losses.

Margin Level: The Number That Decides How Long You Can Survive

The margin level is expressed as a percentage, reflecting the ratio of your used margin to your account net value. The formula is straightforward:

Margin Level = (Account Net Value ÷ Used Margin) × 100%

The higher this number, the safer you are; the lower, the more dangerous. When it drops to 100%, your account net value equals the used margin—at this point, the platform will prohibit opening new positions. If it continues to fall to the platform’s forced liquidation threshold (usually between 20% and 50%), your positions will be forcibly closed.

Two Real Cases to See the Power of a Margin Call

Case 1: From 500% to 100% in Despair

Suppose you have a $1,000 account and open a $10,000 EUR/USD long position, occupying a $200 margin. The initial margin level:

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

Looks safe, right? But if EUR/USD suddenly plunges, and your position incurs an unrealized loss of $800, your account net value drops to $200, then:

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

At this point, you can’t open any new positions. The scariest part is if the market continues to fall, you face forced liquidation.

Case 2: Chain Reaction with Multiple Positions

What if you hold multiple positions simultaneously? Suppose your account is still $1,000, but you’ve opened three positions, each requiring $100 margin. Although your margin level is still at 700%, any large loss on one position can quickly eat into this buffer. That’s why beginners often think they’re “far from liquidation,” but a gap can wipe them out instantly.

How to Avoid Being Margin Called? Risk Management Is Key

To dodge this nightmare, the core is to manage risk properly:

Step 1: Know Your Risk Tolerance

Don’t blindly leverage. 3x, 5x, 10x—each level carries different risks. Low-leverage traders can survive market fluctuations more comfortably, while high-leverage traders are prone to panic and liquidation.

Step 2: Always Set Stop-Loss Orders

Stop-loss orders are your lifeline. Set your stop-loss price when entering a trade, so the system automatically closes the position at that level. This effectively limits individual losses and prevents rapid erosion of your account.

Step 3: Diversify Your Funds

Don’t put all your money into one currency pair. Spread across different trading instruments. Even if one position blows up, others might profit, greatly enhancing your overall risk resistance.

Step 4: Regularly Check Margin Levels

Make it a habit to review your account’s margin level daily. If you notice it approaching 100%, reduce your position or close some trades immediately to leave yourself a safety margin.

In essence, a margin call is the platform’s risk defense line and a warning that your account is close to zero. Understanding and respecting it allows you to stay in the game longer.