What is a Margin Call?

A margin call occurs when a trader’s account no longer has enough available equity to meet the broker’s required margin level. To better understand how does margin work in trading, let’s study an example, 

• A trader may use ₹5,000 as margin for a leveraged position. 
• If the position incurs losses, the account’s equity falls. 
• If it reaches the broker’s specified “margin-call” level, the broker may require the trader to add funds or reduce positions.

Furthermore, if the account continues to lose money and reaches the broker’s stop-out level, the broker may close one or more open positions (generally, an “automatic closure” is performed without waiting for the trader to take action).

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