Margin is the deposit your broker holds to keep a leveraged position open. It isn't a fee — it's collateral. Understanding it is how you avoid having positions closed out from under you.
Margin, in plain terms
If a broker offers 30:1 leverage, a $30,000 position needs $1,000 of margin (1/30th). That $1,000 is set aside — your used margin — while the trade is open. What's left over is your free margin, the buffer that absorbs losses.
As a position moves against you, losses eat into that buffer.
The margin call
When your free margin runs low, the broker issues a margin call: a warning to add funds or reduce positions. It's the platform telling you the buffer is nearly gone.
The stop-out
Ignore the margin call and losses keep mounting, and the broker hits the stop-out level — it automatically closes your positions, usually starting with the biggest loser, to stop your balance going negative.
This is why losing positions so often get closed at the worst moment: the stop-out triggers exactly when the market has moved furthest against you, locking in the loss right before any bounce.
Why higher leverage makes this worse
More leverage means a smaller buffer for the same position. At 500:1, a fraction of a percent move can wipe out your margin and trigger a stop-out almost instantly. The regulated 30:1 retail cap exists to slow this down — see how leverage works.
Staying out of trouble
- Use a fraction of your available margin, not all of it.
- Set a stop-loss so you choose the exit, not the stop-out engine.
- Check whether your broker offers negative-balance protection — it stops your account going below zero.
Educational content, not financial advice. Most retail accounts lose money trading leveraged products.