Margin Call and Stop Out Level Explained: How the 50% and 20% Thresholds Work

If you trade forex or gold with leverage, two terms decide whether your positions survive a bad move: margin call and stop-out. They are easy to mix up, and the numbers attached to them (for example "margin call 50%, stop-out 20%") mean nothing until you know which quantity they are measured against. This guide defines every term, shows the formula, walks through a hypothetical 1,000 USD account holding gold and EURUSD, and then uses XMTrading's published levels as a concrete example.

For the broader mechanics of leverage and required margin, see forex leverage and margin explained. For why one lot needs a different margin on different instruments, see contract size, lot size and margin.

Key takeaways

• Margin level (%) = equity / used margin x 100. Equity is your balance plus or minus floating profit and loss.
• A margin call is a warning that margin level has fallen to a set level. A stop-out is the broker automatically closing positions when it falls to a lower level. Brokers usually close the largest losing position first, then continue if the level is still too low.
• XMTrading states a margin call at 50% and a stop-out at 20% for Standard, Micro, KIWAMI and Zero accounts. Other brokers use other levels, so always read your own broker's terms.
• Distance to stop-out depends mostly on position size relative to equity. A higher leverage setting lowers used margin, but it does not change the profit or loss per pip for the same lot size.
• Stop-outs can fill at worse prices during gaps. Negative balance protection exists for that case, but it does not give back the deposit you lose before it.

The four quantities you need to know

Everything on this page is built from four numbers shown in the terminal of your account (MT4 or MT5).

• Balance: the money in your account from deposits, withdrawals and closed trades, not counting open trades.
• Equity: balance plus or minus the floating profit or loss of open positions (swap and commission included where the platform applies them). Equity moves with every tick.
• Used margin: the amount the broker sets aside to hold your open positions. It is roughly position value divided by leverage.
• Free margin: equity minus used margin. This is what is available to open new positions or to absorb losses before the account is in trouble.

From these you get the figure that matters:

Margin level (%) = equity / used margin x 100

A margin level of 400% means your equity is four times the margin your positions need. At 100%, equity equals used margin and free margin is zero. Below that, you generally cannot open new positions, and the broker's margin call and stop-out rules start to apply.

What a margin call means

A margin call is a warning stage. When margin level falls to the broker's margin call level, the platform or the broker flags the account as short of margin. In the traditional meaning it was a request to add funds. On a modern retail broker it is usually a notification, and new orders are often restricted. Nothing is closed automatically at this point.

At XMTrading, the margin call level is 50% on all four account types (Standard, Micro, KIWAMI, Zero). That means: when equity falls to 50% of used margin, you are in warning territory. You can deposit more funds, close some positions yourself, or do nothing and risk the next stage.

What a stop-out means

A stop-out (called "losscut" in Japanese and some Asian-language materials) is the automatic closing of positions by the broker when margin level falls to the stop-out level. It is the last protection against losses growing past your equity.

At XMTrading, the stop-out level is 20% on all four account types. When equity drops to 20% of used margin, the platform starts closing positions.

How the closing works in detail is set by each broker, so check the terms. Brokers usually:

1. close the position with the largest floating loss first;
2. re-check margin level after that closure;
3. close the next position only if margin level is still at or below the stop-out level.

So a stop-out may close one position or all of them, depending on how much the first closure frees up. It also executes at the next available market price. During a fast move or a gap that price can be worse than the price at which the 20% level was crossed, which is why a stop-out does not guarantee that you keep the remaining 20%.

Worked example: a hypothetical 1,000 USD account

All numbers below are illustrative. Assumptions: USD account, 500:1 leverage, balance 1,000 USD, no other positions, and spread, swap and commission ignored. To keep the arithmetic readable, used margin is held constant even though it changes slightly with price. Margin call 50% and stop-out 20% are the XMTrading levels.

You hold two positions:

• Gold (XAUUSD), buy 0.1 lot. Assume 100 ounces per lot and a gold price of 4,000 USD (an example price). Position value is 10 oz x 4,000 = 40,000 USD. Used margin = 40,000 / 500 = 80 USD. Each 1 USD move in gold is worth 10 USD on this size.
• EURUSD, buy 0.2 lot. Assume a price of 1.10. Position value is 20,000 EUR x 1.10 = 22,000 USD. Used margin = 22,000 / 500 = 44 USD. Each pip is worth 2 USD.

Total used margin is 124 USD. The two trigger points are:

• Margin call when equity = 50% x 124 = 62 USD, so a floating loss of 938 USD.
• Stop-out when equity = 20% x 124 = 24.80 USD, so a floating loss of 975.20 USD.

Now both positions move against you:

Two lessons from this table. First, nothing dramatic happens until late: the margin level number looks comfortable until most of the account is already gone, because the thresholds are measured against used margin, which is small. Second, the account survives a floating loss of about 97.5% of the balance before a stop-out. The 20% level is not a safety margin for you, it is a last line of defence for the broker. If you watch margin level alone, you will react too late. A better habit is to decide how much of your balance you are willing to lose on a position and size the lot from that, as discussed in gold (XAUUSD) margin per lot explained.

In this example the stop-out would most likely close the gold position first, since it carries the larger floating loss. If closing it lifts margin level above 20%, the EURUSD position stays open.

How leverage changes the distance to stop-out

Take the same two positions and change only the leverage setting:

(Illustrative. Whether a given leverage is available to you depends on your broker, account type and equity.)

Higher leverage does lower used margin, and so the stop-out equity falls a little, which gives a slightly larger distance. But look at the size of the change: from 500:1 to 1000:1 the trigger moves from a 975 USD loss to a 988 USD loss, about 1.3% of the balance. The profit or loss per pip is identical in every row, because it depends on lot size, not on leverage.

The practical consequences:

• A high margin level at open is not safety. It only reflects that the broker needs less margin from you.
• What really keeps a position alive is lot size relative to equity. Halve the lots and every price move costs half as much.
• Leverage can change while you hold a position. XMTrading, for instance, steps maximum leverage down as account equity grows, which raises used margin. See XM leverage explained for the tiers.

XMTrading's levels as a concrete example

For XMTrading, the published levels are the same across account types:

Source: XMTrading's official account-type pages. Brokers use different pairs of levels, so do not carry the 50% / 20% figures over to another broker, or to an account on a different entity of the same group.

Negative balance protection: the case where a stop-out is too late

A stop-out is an order like any other. If the market gaps over a weekend, or jumps on a news release without trading in between, the closing price can be far beyond the 20% level, and equity can end up below zero. Negative balance protection (XMTrading calls it a negative balance reset) cancels that deficit so you do not owe the broker money. XMTrading's help centre states that it applies to all clients and that you cannot lose more than you deposited. It does not refund the deposit you lost before that point. See our generic explainer what is negative balance protection, and the XM-specific article XM negative balance protection.

Does a stop-out affect your cashback?

Cashback through CB-Dogs is based on the lots you trade, not on whether the trades win or lose. A position closed by a stop-out is a closed trade like any other, so closed trades count by the lots XMTrading reports for your account. Cashback is credited after XMTrading reports the volume, so the usual timing applies. Losses do not reduce cashback that has already been credited, because it sits as a separate USDT balance at CB-Dogs and not inside your trading account. For the same reason cashback never counts as equity, so it will not lift your margin level or delay a stop-out. Rates for your account type are shown here:

This is not a reason to trade more. A stop-out is a loss, and a cashback worth a fraction of the trading cost does not offset it. For the payout rules (USDT on TRC20, minimum 10 USDT, 3 USDT fee under 50 USDT, free from 50 USDT), see how it works.

A short checklist before you open a position

1. Look up your broker's margin call and stop-out levels, and check which quantity they are measured against.
2. Calculate used margin for the position. The formula and instrument differences are in the contract size guide.
3. Work out the price move that would trigger the margin call and the stop-out, as in the table above, and compare it with a normal daily range for that instrument.
4. Keep enough free margin to survive a normal move, and size the lot so that a move you consider plausible does not take most of your balance.
5. Remember that gold, news events and weekends can move price faster than the platform can close.

What is the difference between a margin call and a stop-out?

A margin call is a warning that margin level has fallen to the broker's warning level. A stop-out is the automatic closing of positions when margin level falls to the lower stop-out level. At XMTrading the levels are 50% and 20%.

What is the margin level formula?

Which position is closed first in a stop-out?

Does higher leverage make a stop-out less likely?

Does a stop-out reduce my CB-Dogs cashback?

Summary

Margin level is equity divided by used margin. A margin call warns you when it reaches the broker's warning level, and a stop-out closes positions when it reaches the lower level: 50% and 20% at XMTrading. The thresholds look far away at a high margin level, but they trigger only after most of the balance is gone, so size positions by how much you can afford to lose, not by the margin level number. To estimate what the trading itself costs and what comes back, use the cashback calculator. Eligibility rules are on the eligibility page.