Leverage lets you open a position larger than your balance. The price of that is a rule: if your losses grow too large for the margin that backs the position, the platform closes trades for you. Three numbers describe how close you are to that point.
The five figures on your account line
- Balance: your money after closed trades.
- Equity: balance plus the profit or loss of open trades, right now.
- Margin: the amount set aside to keep your open positions open.
- Free margin: equity minus margin. This is what is left for new trades.
- Margin level: equity divided by margin, as a percentage.
Margin level is the single number to watch. It falls when your open trades lose money and rises when they gain.
Margin call and stop-out
Two thresholds sit on that percentage. They are set by each broker, so always read your own. On Zexca's TradFi demo desk they are:
- Margin call at 100%. Equity has fallen to the size of your margin. You have no free margin left, so new trades that need more margin are refused. You can still close positions.
- Stop-out at 50%. Equity is half of your margin. The platform closes your largest losing position first, recalculates, and repeats until margin level is back above 50% or nothing is left open.
A worked example
You have a balance of 10,000 USD and a 1:100 account. You buy 1 lot of EURUSD (100,000 euros) at 1.1000.
- Margin = 100,000 × 1.1000 ÷ 100 = 1,100 USD.
- Margin level = 10,000 ÷ 1,100 = 909%. Comfortable.
Now price falls. One pip on 1 lot is about 10 USD.
- Margin call at 100%: equity 1,100, a floating loss of 8,900 USD, roughly 890 pips.
- Stop-out at 50%: equity 550, a floating loss of 9,450 USD, roughly 945 pips.
That is a long way, which is the trap: a single small trade looks safe. The danger arrives when you open several positions, or one very large one. Double the lot size and the distance to stop-out is cut in half; open ten lots and a 95-pip move is enough.
How to stay far away from it
- Size by risk, not by margin. Decide the amount you accept losing, then work out the lot size from your stop. See position sizing explained.
- Always use a stop-loss. It closes one trade on your terms, long before a stop-out closes everything on the platform's. See what a stop-loss is.
- Treat free margin as a buffer, not as money to use. A margin level under 300% with open trades is already a warning.
- Know the leverage you are really using. Leverage explained shows how the same price move changes your result.
Practise watching these figures on a demo account first. A stop-out with virtual money costs nothing and teaches the lesson once.
Educational content, not investment advice. Trading carries risk, including the loss of capital.