How we handle margin calls
A margin call is what happens when the amount of equity you hold in your account falls below the margin required to keep your trades open.
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Below 100%
If your equity drops below 100% of the required margin, you'll receive a margin call. You will no longer be able to open new trades or place orders.
The 75% level
If your equity drops below 75% of the required margin, you'll receive a second margin call. You still will not be able to open new trades or place orders.
50% or less
If your equity drops to 50% or less of the required margin, our automatic margin close-out process will be initiated.
What is a margin call?
A margin call is a notification that the market price has moved against your CFD trades, indicating your trading account is approaching a point where it may not hold sufficient equity to maintain an adequate margin level.
The scenario
- Let's say you have $3,500 in your account, and you want to go long on Company A with a margin rate of 1:2.
- One share of Company A is trading at $100, and you'd like to buy 50 CFDs.
- That equates to $5,000 worth of stock, so with a margin of 1:2 you'd need to put down 50%, or $2,500.
- The rest of the money is provided by your broker.
- There are $1,000 of available funds left in your account.
How the margin call process would operate
The price of Company A declines to $50, reducing the total value of your position to $2,500 (50 shares x $50).
Equity = $3,500 + (-$2,500) = $1,000
Equity-to-Margin Ratio = ($1,000 / $1,250) x 100 = 80%
This means you'll receive your first margin call, as your Equity-to-Margin Ratio is below 100%.
Automatic margin close-out
If the value of your position falls below $1,950, your equity will have dropped below 50% of the required margin. The equity-to-margin ratio becomes:
Equity-to-Margin Ratio = ($450 / $975) x 100 = 46.15%
Since your equity has dropped below the required margin, our margin close-out process will begin, and your positions will start being closed automatically.
The margin close-out process
When your loss-making positions grow to the point where you only have enough equity to cover 50% of your losses, our margin close-out process starts automatically to protect you from spiralling losses.
The automatic close-out applies in the following order:
- All pending orders are closed
- All open positions with negative UPL on open markets are closed
- All remaining positions on open markets are closed
- All remaining positions are closed as soon as the relevant markets open
*Please note that not all markets are open at the same time, so a profitable trade may be closed before a losing one.
How to reduce the possibility of a margin call
There are some sensible steps you can take when trading to lessen the possibility of receiving a margin call.
Avoid over-leveraging
Ensure there is sufficient equity in your account to act as a buffer if the markets move against you.
Diversify
Trade a variety of different asset types to spread out your risk.
Track
Keep an eye on market prices, either manually or by using the tools available on our platform such as price alerts and watchlists.
Manage risk
Apply stop-losses and take-profits to your positions to stay in control of your exposure.
How to avoid a margin close-out
Once you've received a margin call, you can take these actions to bring your margin up to 100% of the amount we require.
Add some funds to your account
Cancel any pending orders
Close some or all of your open trades
1 Please note that while we will endeavor to reach out to you when you're on margin call, it's your responsibility to ensure there are enough funds on your account at all times to cover your margin requirement.
2 Please note that basic stop-losses are not guaranteed and can be subject to slippage. You can choose to place guaranteed stops to place an absolute limit on your losses, but these will incur a charge if triggered.