A margin call is a warning that your trades have gone against you and you no longer have enough funds to cover running losses. It’s a notification that you need to take action to avoid your positions being automatically closed by your broker.
If your equity drops below 100% of the required margin, you’ll receive a margin call.1 You will no longer be able to open new trades or place orders.
If your equity drops below 75% of the required margin, you’ll receive a second margin call.1 You still will not be able to open new trades or place orders.
If your equity drops to 50% or less of the required margin, our automatic margin close-out process will be initiated.
The price of Company A shares falls to $78. This means the value of your position declines to $3,900 (50 x $78), and your equity becomes $2,400 ($1,400 remaining on the position, plus the additional $1,000 in your account). Your current equity-to-margin ratio is therefore 96% ($2,400 / $2,500 x 100). This means you’ll receive your first margin call, as your equity is below 100% of the $2,500 required margin.
Now, imagine that Company A’s share price goes down further, taking the value of your position to $3,300. Your equity is now estimated at $1,800 ($800 remaining on the position, plus the additional $1,000 in your account). This is 72% of the required margin, which is below our second margin-call threshold of 75%. You’ll therefore receive a second margin call.
If the value of your position falls below $2,750, your equity will have dropped below 50% of the required margin (below the $1,250 equity level). Our margin close-out process will begin and your positions will start being closed automatically.
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.*
*Please note that not all markets are open at the same time, so a profitable trade may be closed before a losing one.
Ensure there is sufficient equity in your account to act as a buffer if the markets move against you
Trade a variety of different asset types to spread out your risk
Keep an eye on market prices, either manually or by using the tools available on our platform such as price alerts and watchlists
Apply stop-losses2 and take-profits to your positions to stay in control of your exposure
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1Communication around margin calls. Please note that while we will endeavor to reach out to you when you’re on margin call, it’s your responsibility to ensure there are enough funds on your account at all times to cover your margin requirement. We will attempt to contact you by telephone, email or text message. Markets can move very quickly, which may mean that we are unable to contact you before your positions get closed. If your equity drops from above 100% of margin to below 50% in less than five seconds, for instance, we will not be able to contact you and your positions will be at risk of being closed.
2Please note that basic stop-losses are not guaranteed and can be subject to slippage. You can choose to place guaranteed stops to place an absolute limit on your losses, but these will incur a charge if triggered. You can see these charges on our charges and fees page.
