Margin Call vs Stop Out: What’s the Difference?
A margin call is a warning that your account equity is running low; a stop out is the broker automatically closing positions to protect it.
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Margin call and stop out are two different stages of the same problem: your account no longer has enough equity to safely support the positions you are holding. They are often confused because they happen in sequence on the same losing trade, but they are not the same event, and understanding the gap between them matters.
What a margin call actually is
A margin call is a warning, not an action. Brokers set a margin level — usually expressed as a percentage of equity to used margin — at which point the platform flags your account as under-margined. A common threshold is around 100%, meaning your equity has fallen to roughly the same size as the margin you have locked up in open positions. At that point, most platforms will show an alert, and historically brokers would literally call clients by phone, which is where the term comes from. Today it is almost always an on-screen or email notification instead.
A margin call does not close anything by itself. It is telling you that you have very little free margin left to absorb further losses, and that you need to either add funds, close or reduce positions, or accept that you are close to the next stage.
What a stop out is
A stop out is automatic and non-negotiable. If your margin level keeps falling and reaches a lower threshold set by the broker — commonly somewhere between 50% and 20%, depending on the broker and jurisdiction — the trading platform will start closing your open positions itself, usually starting with the most unprofitable one, without asking for your input. This is not the broker being punitive; it is a mechanical safeguard built to stop your losses from exceeding your account’s equity, which protects both you and the broker from the account going into a deficit.
Why the gap between them matters
The space between a margin call level and a stop out level is effectively your last chance to act on your own terms rather than having the platform act for you. If you top up funds or close losing positions manually during that window, you keep control of which trades get closed and when. If you do nothing and the market keeps moving against you, the stop out mechanism takes that choice away and closes positions at whatever price is available at that moment — which, in a fast-moving market, might be worse than you would have chosen yourself.
A simple illustration
Suppose a broker sets a margin call at 100% and a stop out at 50%. You have $1,000 equity and $1,000 of used margin — margin level exactly 100%, triggering the call. If you take no action and the position continues losing, by the time equity falls to $500 against the same $1,000 used margin, margin level hits 50% and the platform begins forcibly closing positions.
Levels vary by broker and account type
There is no single industry-standard number for either threshold — they are set per broker, and sometimes per account type or jurisdiction, so the exact percentages that apply to you are worth checking directly in your account terms rather than assuming. This is one of the practical details worth comparing before opening an account; our broker finder tool can help narrow down brokers by this kind of account condition alongside leverage and fees.
How to avoid reaching either one
- Keep position sizes small relative to account equity so that ordinary price swings do not threaten your margin level.
- Use stop-loss orders on every trade so a loss is capped well before it can cascade into a margin call.
- Monitor free margin, not just account balance, since balance alone does not reflect floating losses on open trades.
- Avoid holding multiple leveraged positions that can all move against you at once from the same market event.
Key takeaways
- A margin call is a warning at a defined margin-level threshold; it does not close trades.
- A stop out is the broker’s automatic closing of positions at a lower threshold, done without further input from you.
- Exact thresholds differ by broker, so check your specific account’s terms rather than assuming a standard number.