Margin call and stop out example: 100% and 50%.

The previous lesson followed a broker with a single trigger at 100%. Many brokers use two levels instead: a margin call that warns you, and a stop out that closes your trades.

Below, one account goes through both levels, and every number can be redone by hand.

What does the example account look like?

All figures here are illustrative and chosen so the arithmetic is easy to check. Your broker's leverage and trigger levels may be different.

• Account: $2,000 balance, held in US dollars
• Leverage: 1:100, so the margin is 1% of the trade's value
• Trade: buy 1 standard lot of EUR/USD at 1.10000
• Broker rules: margin call at 100% margin level, stop out at 50%

Four numbers come out of this setup:

1. One lot is 100,000 euros. At 1.10000 its value is 100,000 × 1.10000 = $110,000.
2. Used margin is $110,000 ÷ 100 = $1,100.
3. A pip on 1 lot of EUR/USD is 0.0001 × 100,000 = $10.
4. At entry, margin level is $2,000 ÷ $1,100 × 100 = 181.8%.

Spread, commission and swap are left out. Used margin is held at $1,100 throughout. A platform that recalculates it at the current price would move the trigger prices in this example by less than one pip.

How does margin level fall as EUR/USD drops?

Margin level is equity divided by used margin, times 100. Equity is your balance plus the floating profit or loss of open trades. The balance stays at $2,000 until the trade closes.

Every pip down costs $10 of equity. Used margin does not move, so margin level falls in a straight line with the price.

Free margin is equity minus used margin. It reaches zero at the margin call and turns negative after it, which is why the last two rows show minus $300 and minus $550.

Drawn as bars, equity shrinks toward two fixed lines. The 100% line is equity of $1,100, equal to used margin. The 50% line is $550, half of it.

Where do the margin call and stop out prices sit?

You can find both prices before you open the trade. Work backwards from the equity each trigger needs.

The margin call at 100% fires when equity equals used margin, $1,100. The account can lose $2,000 minus $1,100 = $900 first. At $10 a pip that is 90 pips, so the price is 1.10000 minus 0.00900 = 1.09100.

The stop out at 50% fires when equity is half the used margin, $550. The loss allowed is $2,000 minus $550 = $1,450, which is 145 pips. The price is 1.10000 minus 0.01450 = 1.08550.

Between the warning and the forced close, this account has 145 minus 90 = 55 pips of room.

The same rule works for any level. Multiply the trigger level by used margin, subtract the result from your balance, then divide by the pip value to get the pips from entry.

The margin calculator gives used margin for other pairs and trade sizes. The same subtraction then gives their trigger prices.

What happens between 100% and 50%?

The margin call is a warning. On many platforms the margin level figure changes colour or a message appears, and some brokers also send an email. With these rules, nothing is closed at 100%.

Take the price at 1.08800. Equity is $800, margin level is 72.7% and free margin is minus $300. With free margin below zero, the platform refuses any new trade that needs margin.

You can still close trades or deposit money. If the price recovers above 1.09100, the margin level climbs back over 100% by itself.

At 1.08550 the stop out level is reached and the broker closes the trade at market. The $1,450 loss becomes realized, the balance drops to $550, used margin goes to zero and free margin becomes $550.

How can you give the trade more room?

Suppose the price sits at 1.08800, with margin level at 72.7%. Two common responses both push the stop out price lower, at different costs.

Deposit $500

1. Balance rises to $2,500 and equity to $1,300.
2. Margin level becomes $1,300 ÷ $1,100 × 100 = 118.2%, back above the margin call.
3. The stop out still needs equity of $550, so the loss allowed is $2,500 minus $550 = $1,950.
4. That is 195 pips from entry, a stop out price of 1.08050.

Close half the position

1. Selling 0.5 lot at 1.08800 locks in 120 pips × $5 = $600 of loss. Balance becomes $1,400.
2. The remaining 0.5 lot needs $550 of margin and shows a floating loss of $600, so equity is $800.
3. Margin level is $800 ÷ $550 × 100 = 145.5%.
4. Stop out now needs equity of $275. The loss allowed is $1,400 minus $275 = $1,125, which at $5 a pip is 225 pips from entry, a price of 1.07750.

Side by side, closing half gives the most room in pips. It also turns $600 of floating loss into a realized loss, while the deposit puts $500 more at risk on the same trade.

If EUR/USD keeps falling, both choices only move the point where the loss stops. The lesson on how to avoid a margin call covers sizing a trade so the account never gets this close.

Can a stop out happen below 50%?

Yes. The 50% figure triggers the close, and the broker then fills the order at the next price it can get. In a fast market or after a weekend, that price can be well past 1.08550.

Say EUR/USD closes on Friday at 1.08700. Equity is $700 and margin level is 63.6%, so nothing is closed. On Monday the market opens at 1.08300.

1. The broker closes the trade at 1.08300, the first available price.
2. The move from entry is 170 pips, so the loss is 170 × $10 = $1,700.
3. The balance left is $300. At the fill, that equity was only 27.3% of the $1,100 used margin.

A fill worse than the expected price is a form of slippage. A large enough gap can push equity below zero. Whether the broker resets a negative balance to zero depends on the broker and where your account is held, so read its terms.

With several trades open, a stop out usually closes them one at a time and rechecks margin level after each close. Many brokers start with the trade showing the largest loss, and each broker's terms give the exact order.

The next lesson applies the same arithmetic to an account that starts with $100.