Margin Call
A margin call is a demand from your broker to add money or reduce positions because your account equity has fallen below the required margin.
Buying on margin means borrowing from your broker to hold larger positions. If prices move against you, your own money in the account shrinks — and once it drops below the required level, the broker demands more. That demand is a margin call. This entry explains what triggers one, how to calculate it, and what happens if you cannot pay.
- Category
- Risk Management
- Reading time
- 4 min
- Also called
- Maintenance call, House call
- Updated
A margin call in plain words
If the value of securities bought on margin falls, the broker may require you to add cash or securities — that is a margin call.1 See Margin.
A common trigger is account equity falling below the firm’s or FINRA’s maintenance requirement.2 Under FINRA’s newer intraday rules, adequate equity must be kept throughout the trading day, not just at the close.2
How a margin call unfolds, step by step
Prices fall
The value of your positions drops.
Equity shrinks
Your share of the account is value minus the loan.
Requirement is breached
For margin stocks, equity generally must stay at least 25% of the long market value.2
Broker issues the call
You are asked to deposit cash or securities.1
You cannot add new positions
Purchases are usually blocked until the call is met.1
Or the broker sells
If you do not meet it, the firm sells your securities.1
Worked examples
Example 1 — Still above the requirement
No callYou buy $10,000 of stock with $5,000 of your money and a $5,000 loan. The price falls 30% to $7,000.
| Equity | $7,000 − $5,000 = $2,000 |
| Requirement (25%) | $7,000 × 25% = $1,750 |
Equity is still above the minimum, so no call yet — but the cushion is thin.
Example 2 — The margin call
Margin callThe position falls further to $6,400.
| Equity | $6,400 − $5,000 = $1,400 |
| Requirement (25%) | $6,400 × 25% = $1,600 |
| Call | $1,600 − $1,400 = $200 |
You must deposit at least $200 or the broker can sell positions.
Example 3 — A stricter house requirement
Bigger callYour broker uses a 30% house requirement instead of 25%, at the same $6,400 value.
| Requirement (30%) | $6,400 × 30% = $1,920 |
| Call | $1,920 − $1,400 = $520 |
Firms can set higher requirements and raise them at any time without advance notice.1
Meeting a margin call: your options
| Aspect | Deposit cash or securities | Sell positions |
|---|---|---|
| Effect on positions | Kept | Reduced |
| Effect on loan | Unchanged | Paid down |
| Who decides | You | You — or the broker if you do not act |
| Risk afterwards | Same exposure | Lower exposure |
Why understanding margin calls matters
Avoiding forced selling
Brokers can sell at the worst moment. See Liquidation.
Sizing positions
Leave room for normal price swings. See Position Sizing.
Short selling
Short positions also need margin and can trigger calls. See Short Selling.
Planning cash
Know how much you could add quickly.
Advantages and disadvantages
Advantages
- Warns that losses have become large relative to your money.
- Gives a chance to add funds before forced sales.
- Clear, calculable trigger levels.
Disadvantages
- Can force selling after a fall.
- Brokers need not warn you before selling.
- No right to an extension of time.
- Losses can exceed your initial deposit.
Going deeper
Read as far as you need. Each level builds on the one before it.
Equity, not price
Beginner
Margin calls depend on your equity — the account value minus the loan — not on the share price itself.
No notice required
Intermediate
Leverage magnifies the trigger
Advanced
The more you borrow, the smaller the price drop needed to breach the requirement. High leverage turns ordinary volatility into margin calls. See Leverage.
Common mistakes
Borrowing the maximum
Leaves no room for a normal pullback.
Waiting for a bounce
The broker may sell before it comes.
Assuming you will be warned
Firms are not required to notify you first.
Forgetting house rules
Your broker’s requirement can be higher than the minimum.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A margin call demands more equity in a margin account.
- It is triggered when equity falls below the maintenance requirement.
- For margin stocks the minimum is generally 25% of long market value.
- Brokers can sell your positions without notice.
- Lower leverage makes margin calls less likely.
Frequently asked questions
How long do I have to meet a margin call?
Can I lose more than I deposited?
Do cash accounts get margin calls?
Further learning
- Margin
How margin accounts work.
- Leverage
Why borrowing magnifies risk.
- Liquidation
What forced closing looks like.
- Position Sizing
Sizing trades to avoid calls.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Investor.gov (SEC). Investor Bulletin: Understanding Margin Accounts (opens in a new tab) Checked .
- FINRA. Know What Triggers a Margin Call (opens in a new tab) Checked .
Read more elsewhere
- Trading Metrics (our sister site): Understanding Leverage (opens in a new tab)
- Investopedia: Margin Call (opens in a new tab)
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.