A margin call is a demand from a broker for a trader to deposit additional funds or close positions when the account equity falls below the required maintenance margin level. It occurs when trading losses reduce the account balance to a point where it can no longer support the open positions, and it serves as a warning that the account is at risk of forced liquidation.
Brokers require traders to maintain a minimum margin level (typically 50-100% of the used margin). When your account equity drops below this level due to unrealized losses, a margin call is triggered. For example, if you have $10,000 in your account with $8,000 in used margin, and the broker's margin call level is 100%, a margin call occurs when your equity drops to $8,000 or below. At this point, you must either deposit more funds, close losing positions, or risk having the broker forcibly liquidate your positions (stop-out), often at the worst possible prices.
You have a $10,000 account and open a 2-lot EUR/USD position with $4,000 in required margin. The market moves against you, and your floating loss reaches $6,500, leaving your equity at $3,500. Since your equity ($3,500) is below the required margin ($4,000), a margin call is triggered at 87.5% margin level. If you do not deposit funds or close positions, the broker will begin liquidating your position when equity reaches the stop-out level (often 50%), meaning at $2,000 equity.
A margin call is effectively a last warning before account destruction. It means your risk management has failed, your positions are too large for your account, or you are using too much leverage. Experienced traders never reach margin call territory because they use proper position sizing, stop losses, and conservative leverage. Understanding margin calls is crucial for anyone trading on margin, which includes all forex and futures traders.