What are Margin Call and Stop Out?
A Margin Call is a notification displayed on the MT4 platform when the level of funds for maintaining/holding position(s) in your account is low.
The margin call level is triggered when the Margin Level reaches 80% and it is calculated using the following formula:
Margin Level (%) = Equity / Margin * 100
Equity = Balance + Open Profit/Loss (unrealized profit or loss)
Stop Out is a functionality triggered when you no longer have enough capital to keep trades open on the market. When the Margin level reaches 50%, the system automatically starts closing trades from the least profitable one in an attempt to prevent a negative balance.
Equity = $2,000
Margin = $2,000
Margin Level = Equity / Margin * 100 = 2,000/2,000 *100 = 100%
If the markets go against you and:
- Equity falls to $1,600 the Margin Level = 80% thus triggering a red line notification on your MT4, referred to as a Margin Call
- Equity falls to $1,000 the Margin Level = 50% thus triggering a Stop Out. At this stage, the system will start closing trades from the least profitable one.