Margin Call vs Stop Out: What's the Difference?

By Rise Together FX team · 7 min read

Margin-level gauge with two labelled threshold ticks, margin call and stop out, and a needle between them

A margin call is a warning that your account is running short of money to support its open trades. A stop out is when the broker starts closing those trades for you. Both are triggered by your margin level, and both usually arrive after a large part of the account has already been lost. This guide explains how they work, the UK retail rule, and why a fast market can make the loss bigger than the levels suggest.

Trading forex and CFDs is high risk and you can lose all the money you put in. Most retail CFD accounts lose money. This article is general education, not financial advice.

Margin, free margin and margin level

When you open a leveraged trade, your broker sets aside part of your account as margin. MetaTrader 5 (MT5) shows these figures for your account:

Balance: the money in the account, not counting open trades.
Equity: the balance plus or minus the profit or loss on open trades.
Margin: the money set aside to support open positions.
Free margin: equity minus margin, the amount available to open new positions.
Margin level: equity ÷ margin × 100, as a percentage.

Margin level is the number that matters here. As losses on open trades grow, equity falls, so margin level falls too. Opening more trades adds more margin, which also pushes margin level down.

For how leverage sets the margin on each trade, see What is leverage in forex?

What a margin call is

A margin call is a warning that your margin level has fallen to a level set by your broker. On MT5 the account line turns red. Depending on the broker, you may also get an email or app alert.

A margin call doesn't close anything by itself. It tells you the account is close to the point where trades will be closed. At that stage you can usually close trades yourself, which turns floating losses into realised ones, or add money, which raises equity but also puts more money at risk.

Some brokers may also stop you opening new trades once margin level falls below a certain point. Margin call levels vary between brokers and account types. MT5 lets brokers set them either as a percentage or as an amount of money, so check your broker's terms.

What stop out is and how brokers close positions

Stop out is the level at which the broker starts closing your open trades to stop the account falling further.

How it typically works on MT5:

When margin level reaches the stop out level, the broker's server starts closing positions.
In MT5's normal mode, the position with the largest loss is closed first. If that brings margin level back above the stop out level, the remaining positions stay open. If price keeps moving, the next is closed, and so on.
Some accounts use FIFO (first in, first out) rules, where positions are closed oldest first.
Closing is automatic. You don't choose which trades go or at what price.

Every trade closed at stop out turns a floating loss into a realised one. If the remaining trades keep losing, more are closed.

Illustrative example (made-up numbers to show the mechanics; not based on any real account or on our strategy):

Account balance: £2,000. Open trades use £400 of margin.
Suppose this broker's margin call level is 100% and its stop out level is 50%.

Floating loss	Equity	Margin level	What happens
£0	£2,000	500%	Nothing
£800	£1,200	300%	Nothing, but 40% of the account is already lost
£1,600	£400	100%	Margin call warning
£1,800	£200	50%	Stop out: positions start being closed

By the time the margin call arrives, 80% of the account has already been lost. A margin call is a late warning, not an early one. And a stop out doesn't protect the money already lost: it only limits how much further the loss can go, and even that isn't certain, as the next sections explain.

The UK retail margin close-out rule (50%) vs other regimes

For retail clients of UK firms trading CFDs and rolling spot forex, the FCA's rules require the firm to close one or more of your positions, as soon as market conditions allow, once your net equity falls below 50% of the margin required to keep your positions open. The firm must also tell you clearly how your close-out level is calculated and triggered.

Brokers can set their own margin call and stop out levels, as long as they meet that rule. The same UK rules give retail clients negative balance protection: your losses on these products are limited to the money in your CFD account, so the account can't be left owing money.

These protections apply to retail clients of firms covered by the UK rules. Don't assume they apply to an account with a broker outside the UK, or with an overseas company in the same group. Brokers elsewhere may set stop out levels lower, letting losses run further before positions are closed, and may not offer negative balance protection. See UK vs offshore broker accounts.

Why gaps and fast markets can make losses bigger than expected

A stop out level is a trigger, not a promise of the exit price. The broker closes positions at the next available price, and that price can be much worse than the level that set it off.

Weekend gaps. Forex markets close over the weekend. If news breaks, Monday's opening price can be a long way from Friday's close. Positions are closed at the opening price, not at the stop out level that was skipped.
Fast markets. Around major news or central bank announcements, prices can jump, and the broker may not be able to close at the level you'd expect.
Low liquidity. At quiet times, such as around the daily rollover, spreads can widen. A wider spread can push margin level down on its own and trigger a stop out.

Under UK retail rules, negative balance protection means you shouldn't lose more than the money in your account. Without it, a large gap could leave the account owing money to the broker.

How this applies to grids holding many open trades

Strategies that hold many trades open at once, such as grid and martingale-style strategies, are particularly exposed to margin calls and stop outs:

Each new trade adds margin. As a grid adds trades while price moves against it, the margin used grows, so margin level falls from two directions at once: losses push equity down, and new trades push margin up.
If later trades are larger, losses grow faster than the price move, and margin level can fall faster than you might expect.
Closing the largest loss first can leave the rest of a group of trades open. The strategy may then be holding only part of what it opened, and the remaining positions can keep losing.
A stop out can lock in a large loss that the strategy was relying on price to recover.

Grid trading vs martingale shows step by step how margin level falls as a grid adds trades.

Our own strategy is an automated grid on AUDCAD in which later trades can be larger, a martingale-style approach. Everything in this article applies to it. Read our full risk warning.