Margin call vs stop out: what actually happens at 100% and at 50%

Ask any trading group what a margin call is. You'll get some version of "that's when your broker closes everything". That is not what a margin call does. That's the stop-out, a different event, later, at a lower number. The margin call is the message that comes before it, and it closes exactly zero positions.

Sounds like pedantry. It isn't. Confuse the two and you'll believe there's nothing left to save at the exact moment there is still something to save. That misunderstanding has a price tag, and it's a real one.

Short version, if this is all you came for. A margin call is a warning, usually at 100% margin level, and it closes nothing. A stop-out is the moment your broker starts force-closing your positions itself, usually at 50%, beginning with your biggest loser.

What is a margin call exactly?

A margin call is your broker telling you your equity has dropped to roughly your used margin. A margin level around 100%, in other words. It's a request: add funds, or cut your exposure. Nothing gets closed.

That last part is the whole point. Your positions keep running. The market can still turn and push your margin level back up without you lifting a finger. All your broker did was say: heads up, you're tight.

The name is a fossil. There was a time when someone at the bank literally phoned you to ask for money. Now it's a red bar in MT5 and an email that dies somewhere between two newsletters. Same job, less drama, and that's exactly why people miss it.

What is a stop-out, and how is it different?

The stop-out is the hard floor. At that level the platform starts closing positions automatically, and it keeps closing until your margin level climbs back above the stop-out. You don't confirm anything. You also can't stop it.

Put them side by side and it's obvious.

Everything lives between those two rows. The margin call says there's still time. The stop-out says time's up.

Which percentage triggers what?

The formula first, because it's simpler than people expect. Margin level is your equity divided by your used margin, times 100. That's it.

Now with real numbers. You have €2,000 in the account and you open 0.30 lots of EUR/USD. That's €30,000 of position. At 1:30 leverage your broker locks up €1,000 of margin for it. So your margin level is 2,000 divided by 1,000, times 100. 200%.

The trade goes against you. Equity falls.

At €1,000 of equity you're at 100%. That's your margin call. You're down €1,000 at that point, half the account, and every position is still open. At €500 of equity you're at 50%. That's your stop-out, and there the platform closes for you.

In this example there is €500 between the margin call and the stop-out. That's not a technical detail. That's the money you can still act with before someone else acts for you.

If you'd rather see it in pips: on 0.30 lots of EUR/USD a pip is roughly €3. So 200% to 100% is about 330 pips against you. From the call to the stop-out, another 165. On a quiet day that's a long way off. Around a CPI print it's one move.

And here's the bit most articles leave out. 100% and 50% are your broker's policy, not a law of physics. Plenty of brokers stop out at 20%, or 30%, or as high as 100%. Some don't send a warning at all any more. Your numbers live on your broker's "Trading Conditions" page. Look them up once, write them down, done. Better to find them now than when the screen is red.

What does the broker close first?

Usually the position with the largest loss. Some brokers go after the one holding the most margin instead. Then the platform recalculates. Still below the stop-out? Next one closes. And the next. Until it works.

So you don't choose which position dies. That stings more than it sounds. Say you have three trades open: two small losers and one that's finally starting to turn but is still red. If that third one happens to carry the biggest loss, it goes first. The exact trade you were waiting on.

There's no friendly fill either. A stop-out is a market order in a market that is moving hard right at that moment. Slippage comes with it. The number you saw on your screen is not necessarily the number you keep.

Why does a stop-out exist in the first place?

Not to punish you. That's the framing traders put on it themselves, and it's wrong. The stop-out is there to stop your account going negative.

Without that floor a position can gap through and end up below zero. Then you're not sitting at €0, you owe your broker money. That's not hypothetical. In January 2015 the Swiss National Bank dropped the franc's peg to the euro, EUR/CHF collapsed within minutes, and retail accounts ended up deep in the red. The stop-out is the machinery that catches that under normal conditions.

Think of it as the fuse in your fuse box. Annoying at the moment it trips. It's there so the house doesn't burn.

What does this mean if you run a bot?

This is where it all lands, because most stop-outs aren't bad luck. They're leverage decisions from three weeks earlier finally sending the invoice.

We run at 1:30. Our bot takes a maximum of 1% risk per trade, stops the day at 3% drawdown, and holds no more than three positions at once. Run that combination on the €2,000 account above. Three positions each risking 1%, at the sizes that implies, use a few hundred euros of margin between them. Your margin level doesn't sit at 200%, it sits higher, and the daily drawdown stop fires at €60 of loss. Long, long before margin becomes a conversation at all.

Compare that to 1:500. The same €2,000 can carry €1,000,000 of position there. Actually use that leverage and a 0.2% move against you is enough to erase your equity. At 1:30 the same account tops out at €60,000 of position and needs roughly a 3.3% move. On EUR/USD that's an exceptional day. On EUR/USD at 1:500, it's a Tuesday morning.

That's the honest reason we refuse high leverage. Not because it sounds dangerous in a disclaimer, but because 1:500 shrinks the distance between "this trade is going against me" and "the broker closed it for me" to almost nothing.

And the part I'm not going to polish away: a stop-out is still possible. With us too. At 1:30 too. There is no setup where it can't happen. It just sits so far away that you don't reach it in practice, and the drawdown stop pulls the brake long before. Anyone telling you it can't happen on their system is selling you something. More on how those limits actually work in our piece on risk management with a trading bot.

How do you make sure you never get there?

Start with that broker page. Find your own margin call level and your own stop-out level and note them down. Two numbers. Five minutes, and it's the only homework in this article.

Then put your margin level somewhere you'll see it. In MT5 it's at the bottom of your Trade tab, next to your equity and your used margin. Most people only watch their P&L and never look at the number that actually decides things.

If a call does land, nine out of ten people reach for the deposit button. Don't, not first. Adding funds raises your equity and therefore your margin level, but your positions stay exactly as big as they were. You've made the problem more expensive, not smaller. Cutting size works better: close part of it, your used margin drops, and your margin level rises without a single euro going in. Funding is fine as a second step, with a plan behind it. Not as a panic button.

The structural fix sits one layer down, and it's boring. Pick leverage where margin is never the binding constraint, and then your stop-loss is the only thing closing your positions. That's how it should be. Trade at 1:500 and you've given your broker a vote on your exits, and that's not a partner weighing your interests.

Grid and martingale bots break on exactly this. They stack positions into a losing direction, so your used margin climbs while your equity falls. Both sides of the fraction breaking at once. Why that so often ends in an empty account is in our piece on the danger of martingale and grid bots.

One last thing. If you're reading this because you got stopped out once and never understood what hit you: now you do. Two numbers, two events, and a gap in between where you still have a say. If you want to know what this knowledge is actually worth without the fairytales, what you realistically earn with a trading bot is the next one to read.