How we handle margin calls

What is a margin call?

A margin call is a notification that the market price has moved against your CFD trades, indicating your trading account is approaching a point where it may not hold sufficient equity to maintain an adequate margin level.

The scenario

• Let’s say you have $3,500 in your account, and you want to go long on Company A with a margin rate of 1:2.
• One share of Company A is trading at $100, and you’d like to buy 50 CFDs.
• That equates to $5,000 worth of stock, so with a margin of 1:2 you’d need to put down 50%, or $2,500.
• The rest of the money is provided by your broker.
• There are $1,000 of available funds left in your account. 

How the margin call process would operate?

The price of Company A declines to $50, reducing the total value of your position to $2,500 (50 shares × $50). This decline directly impacts your account's equity, which is calculated as follows:

As the value of your CFD position decreases, the required margin—the funds needed to maintain your position—is also adjusted based on the current price. In this case, it becomes $1,250. To determine if a margin call should be triggered, we calculate your equity-to-margin ratio:

This means you’ll receive your first margin call, as your Equity-to-Margin Ratio is below 100% of the $1,250 required margin.

Now, imagine that Company A’s share price declines further to $45, reducing the total value of your position to $2,250 (50 contracts × $45).

Your equity is now calculated as follows:

The margin requirement is adjusted based on the new position value to $1,125.

Your equity-to-margin ratio is then calculated as:

Since this is below our second margin call threshold of 75%, you will receive a margin call notification.

If the value of your position falls below $1,950, your equity will have dropped below 50% of the required margin (below the $450 equity level).

At that moment, the price of the derivative will be $39. The margin will decrease to $975, the unrealized loss will increase to -$3,050, and your remaining equity would be $450.

The equity-to-margin ratio is calculated as:

Since your equity has dropped below the required margin, our margin close-out process will begin, and your positions will start being closed automatically.

The above example does not take into account fluctuations in foreign exchange (FX) rates. It assumes that the traded asset is denominated in the same currency as the user account. If the asset is quoted in a different currency, FX rate movements may impact margin requirements, unrealized profits/losses, and overall equity levels.

When your loss-making positions grow to the point where you only have enough equity to cover 50% of your losses, our margin close-out process starts automatically to protect you from spiralling losses. Please note the automatic margin close-out process is a regulatory requirement, and cannot be deactivated.

The automatic close-out applies in the following order until your equity is above 50% of the margin requirement.*

1. All pending orders are closed
2. All open positions with negative UPL (unrealised profit / loss) on open markets are closed*
3. All remaining positions on open markets are closed*
4. All remaining positions are closed as soon as the relevant markets open

*Please note that not all markets are open at the same time, so a profitable trade may be closed before a losing one.