How to Calculate Margin Call and Stop Out Levels in Forex Trading

Recently, some readers asked me about how to calculate Stop Out points (when the broker will automatically close trades) and Margin Call levels (leverage warnings). These are basic but critical concepts, yet even experienced forex traders sometimes overlook them.

This article will not repeat the general definitions of these terms. Instead, it summarizes simple calculation methods so you can quickly know your account's warning levels and the exact equity remaining if a Stop Out occurs.

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What You Need to Know Before Calculating

To calculate these levels, you need the following information from your broker:

1. Account leverage (e.g., 1:400)

2. Margin Call level (percentage)

3. Stop Out level (percentage)

4. Stop Out method (how the broker closes trades)

With these four factors and your current open positions, you can calculate Margin Call and Stop Out accurately.

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The Formula

MARGIN LEVEL 100% = (Number of Lots × 100,000) ÷ Leverage

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Example 1 – Full Stop Out

Broker: ThinkMarkets (Standard Account)

• Leverage: 1:400

• Margin Call: 100% (alert when margin level drops to 100%)

• Stop Out: 50%

• Stop Out method: Automatically closes all positions

Account balance: $200

Open positions: 0.5 lot

Calculation:

Margin Level 100% = 0.5 × 100,000 ÷ 400 = 125

Interpretation:

• If equity decreases to $125, Margin Level hits 100%, triggering a margin call alert (red warning, usually also sent via email).

• If equity continues to fall to 50% margin level, Stop Out triggers. In this method, all positions are closed, leaving 50% of $125 = $62.5 in the account.

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Example 2 – Partial Stop Out

Broker with partial Stop Out policy:

• Leverage: 1:400

• Margin Call: 30%

• Stop Out: 20%

• Stop Out method: Close largest positions first

Account balance: $500

Open positions: 2 lots (split into 1 lot, 0.6 lot, 0.4 lot)

Calculation:

Margin Level 100% = 2 × 100,000 ÷ 400 = 500

Interpretation:

• Equity drops to $150, Margin Level = 30%, triggering a margin call warning.

• Equity drops to $100, Margin Level = 20%, triggering Stop Out. The broker automatically closes the largest position first (1 lot).

• If price reverses afterward, the account can temporarily survive. You can recalculate new margin levels for remaining positions (0.6 + 0.4 = 1 lot, new margin level 100% = 250) to anticipate future Stop Out points if the market continues against you.

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Key Takeaways

• Using this simple calculation, traders can anticipate Margin Call alerts and potential equity after Stop Out.

• Always calculate your trade volume carefully, keeping position sizes small relative to account equity to avoid forced liquidation.

• Understanding these levels is crucial for risk management, especially when using high leverage accounts.

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Conclusion:

By calculating Margin Call and Stop Out levels properly, you can protect your trading account, avoid unnecessary losses, and trade more confidently. Keep in mind that proper position sizing and risk management are just as important as your trading strategy.

Thank you for reading! Share this article if you think it can help other traders. See you in the next post.

Regards,

CaPhiLe.Com