Margin Level
Trading BasicsThe ratio of account equity to used margin, expressed as a percentage. Margin level = (Equity / Used Margin) x 100%. Below 100% typically triggers a margin call.
What Is Margin Level?
Margin level is a percentage that shows how much of your Used Margin is covered by your account Account Equity. The formula is: Margin Level = (Equity / Used Margin) x 100%. A margin level of 500% means your equity is five times your used margin.
Margin Level Thresholds
Brokers set two critical thresholds:
- Margin call level (typically 80-100%): You receive a warning that your account is running low. Some brokers restrict opening new trades at this point.
- Stop-out level (typically 20-50%): The broker automatically closes your losing positions starting with the largest loss. ESMA-regulated brokers must set stop-out at 50% or lower.
Margin Level Example
You deposit $5,000 and open a trade requiring $1,000 in margin. Your margin level is ($5,000 / $1,000) x 100% = 500%. If your trade loses $3,500, your equity drops to $1,500, and your margin level falls to 150%. If the loss reaches $4,500, equity is $500 and margin level is 50%, triggering a stop-out at most brokers.
Related Terms
Margin
The deposit required to open and maintain a leveraged position. Margin is not a fee. It is collateral held by the broker while your trade is open.
Margin Call
A notification from your broker that your account equity has fallen below the required maintenance margin level. If triggered, you must either deposit additional funds or close positions to restore your margin ratio.
Stop-Out Level
The margin level percentage at which a broker automatically begins closing your open positions to prevent further losses. Most regulated brokers set this at 20-50% margin level.
Free Margin
The amount of money in your account that is not tied up as collateral for open positions. Free margin equals equity minus used margin.