Trading term

What is Margin call?

A margin call is a broker's demand for more funds when a leveraged account's equity falls below the required maintenance margin, usually after losses. The trader must deposit cash or the broker closes ('liquidates') positions — often at a bad price. It's the mechanism that forces losing leveraged traders out.

When you trade on margin, your account must stay above the maintenance-margin level. As losses accumulate — settled daily via mark-to-market — your equity falls. Once it drops below maintenance margin, the broker issues a margin call: a demand to restore the account by depositing more money or reducing the position. If you don't (or can't) meet it in time, the broker closes your positions for you to cap the risk, a 'forced liquidation.'

Margin calls are brutal precisely because they arrive at the worst moments. A sharp adverse move triggers them when prices are already against you, and forced liquidation dumps your position into that same bad market, locking in the loss right before any potential recovery. In fast markets, some brokers liquidate automatically with little or no warning. This is why experienced traders keep a large buffer above maintenance margin and size positions conservatively — the goal is to never be in a position where a normal swing can trigger a call.

A margin call is triggered
maintenance margin $3,000equity $4,000MARGIN CALLLosses erode equity below maintenance → margin call

As daily losses erode account equity, it falls toward the maintenance-margin line. Cross below it and a margin call fires — deposit more, or the broker liquidates the position, often at the worst time.

For example

You post $4,000 to hold a futures position with a $3,000 maintenance margin. A bad run marks your account down to $2,700 — below maintenance. You get a margin call: deposit $1,300 to restore initial margin, or the broker liquidates the position at the current (losing) price.

Go hands-on in Premium

That's Margin call in theory — it clicks when you read it on a live chart. Practise it hands-on in the TradeWize Premium Futures & Derivatives track.

Explore Premium →

Why it matters to you

The margin call is the moment leverage turns from a tool into a trap — it can force you out of a trade at the worst time, converting a temporary drawdown into a locked-in loss. Understanding what triggers one, and leaving a wide buffer above maintenance margin, is the single most important defence in leveraged trading.

⚠ Forced liquidation locks in the loss

Traders assume they'll have time to react to a margin call, but in fast markets liquidation can be automatic and instant, selling your position into the very weakness that triggered it. Running near the maintenance margin leaves no room for normal volatility — a routine swing becomes a forced exit at the bottom.

Frequently asked questions

What is a margin call?

A margin call is a broker's demand for additional funds when your leveraged account's equity falls below the maintenance margin, typically after losses. You must deposit cash or reduce the position; if you don't, the broker liquidates positions to cover the shortfall.

What triggers a margin call?

Losses that erode your account equity below the maintenance-margin requirement. Because futures are marked to market daily, adverse price moves reduce your balance in real time, and once it crosses below the maintenance level, the call is triggered.

What happens if you can't meet a margin call?

The broker closes ('liquidates') some or all of your positions to bring the account back within requirements — often at an unfavourable price, locking in the loss. In fast markets this can happen automatically and instantly, sometimes with little warning.

How do you avoid a margin call?

Use less leverage, keep a large cash buffer well above the maintenance margin, and size positions so a normal adverse move can't push you below the threshold. The goal is to never be so close to maintenance margin that routine volatility can trigger a forced liquidation.

Related terms

BackwardationBackwardation is when futures prices are lower for later delivery dates — the futures curve slopes downward. It often signals tight near-term supply or strong demand for immediate delivery. For futures holders it creates a positive 'roll yield,' as they sell pricier near-term contracts and buy cheaper later ones.BasisBasis is the difference between an asset's futures price and its current spot (cash) price. It reflects carrying costs, supply and demand, and time to expiry — and it converges to zero as the contract nears expiration, since a future about to settle must match the spot price. Traders watch basis to gauge conditions and to hedge.CFD (contract for difference)A CFD (contract for difference) is a derivative where you and a broker agree to exchange the difference in an asset's price between opening and closing the trade. You never own the underlying — you simply profit or lose on the price move, with leverage. CFDs cover stocks, indexes, commodities and crypto, and are popular outside the US, where they're banned.ContangoContango is when futures prices are higher for later delivery dates — the futures curve slopes upward. It usually reflects the costs of storing and financing an asset until delivery. Contango creates a 'roll cost' for anyone holding futures over time, as they repeatedly sell cheaper near-term contracts and buy pricier later ones.
← Back to the full glossary