Margin Call
A broker demand to deposit more funds immediately because account equity has fallen below the required maintenance margin level.
A margin call occurs when leveraged losses reduce account equity below the broker's maintenance margin threshold. The broker either demands an immediate cash deposit or liquidates positions (often at the worst possible price) to restore the margin requirement.
Margin calls are the trading equivalent of a forced liquidation at the bottom of a move. They are almost always the result of over-leveraging combined with inadequate stop-loss discipline. Avoiding margin calls is one of the most fundamental reasons to size positions conservatively.
Example
You hold $20,000 of stock on $10,000 equity and a fixed $10,000 loan (2:1 leverage). Maintenance margin = 25% of current position value. The call triggers when equity = 25% of position value: P − $10,000 = 0.25P → P = $13,333. That is a ~33% decline — the position falls to ~$13,333, equity drops to ~$3,333 (the 25% level), triggering a margin call for additional funds or forced liquidation. (A 25% drop alone leaves equity at $5,000 vs a $3,750 requirement — no call yet.)
Related Terms
Capital Preservation
The principle of protecting trading capital above all else — because you cannot trade without capital, survival is the first objective.
BeginnerClearinghouse / Central Counterparty (CCP)
The entity that steps between buyer and seller in every cleared trade, becoming counterparty to both and guaranteeing performance so neither faces the other's default.
IntermediateDrawdown
The peak-to-trough decline in account equity from a high point to the subsequent low before a new high is reached.
BeginnerPosition Sizing
Calculating exactly how many shares, contracts, or lots to trade so that a stop-out costs no more than your chosen risk percentage.
BeginnerRisk Per Trade
The percentage or dollar amount of your account you are willing to lose on a single trade. Typically 0.5–2% for most traders.
BeginnerVariation Margin
The daily cash transfer that settles mark-to-market gains and losses on open futures positions, paid to the clearinghouse and credited to winners.
Intermediate