Trading Academy, Trading Knowledge

Oct 5, 2026

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What Is a Margin Call and Stop Out? Not Your Stop Loss, but the Platform’s Last Line of Defence

You wake up, open your trading platform, and the trades you still had open last night are all gone.

Your history shows several closed trades you never closed yourself, and only a small part of your money is left.

Did the system make a mistake?

It’s not a system error. The platform force-closed your trades — what traders call “blowing up” your account.

This is part seven of MASQuant’s “Trading Academy · Beginner Essentials” series. The first six parts followed a trade from the moment you place it to holding it overnight: contract specifications, lot size, leverage, stop loss, the spread, and the overnight swap. This one covers the line your account eventually hits when those things aren’t handled well.

The short answer

Blowing up isn’t a stop loss you set. It’s the platform pressing the close button for you, so that your account doesn’t go negative.

When it happens depends not on how much a single trade has lost, but on your whole account’s “margin level”.

First, get these straight: balance, equity and margin

Balance is money that’s already settled. Equity also counts the floating P&L of your open trades — the profit or loss that isn’t closed yet and moves with the price:

Equity = account balance + current floating P&L

Open trades lock up a deposit called used margin (shown simply as Margin in MT5). As part three explained, it isn’t a stop loss. Equity minus used margin is your free margin: the money still available to open new trades and absorb losses.

Margin level: the percentage the platform is watching

Margin level = equity ÷ used margin × 100%

In plain terms: your equity as a multiple of the deposit that’s locked up. A growing floating loss (less equity) and opening more trades (more used margin) both push it down.

Two lines: the margin call level and the stop out level

	Margin call level	Stop out level
What happens when you hit it	The platform warns you to add funds or reduce your positions yourself	The platform stops waiting and closes positions for you
Example used in this article	100%	50%

The margin call level is a warning. Take 100%: at this point equity exactly equals used margin and free margin is 0, so you usually can’t open any new trades.

The stop out level is the last line of defence. The platform usually starts with the trade that’s losing the most, closing it to free up its margin. Once your margin level is back above the line, it stops; if not, it moves on to the next one.

The exact percentages for both lines vary by platform and account type. This article uses 100% and 50% only because they’re easy to calculate; they don’t represent any platform’s actual rules.

Blowing up is not the same as a stop loss

“Blowing up” your account (people also loosely say “getting margin called”) is everyday slang for being force-closed by the platform. A stop loss is an exit you decide: “if price gets here, I was wrong” (part four). A stop out is decided by the platform. It protects your account from going negative, not your trading plan.

Buying shares on margin and trading futures follow the same logic: both have a maintenance margin requirement, and if your account falls below it, you can get a margin call or have your positions liquidated. The actual ratios are whatever your broker and the exchange publish.

A simple example

(These numbers are for illustration only, not real market prices or rules; to keep the maths simple, assume used margin stays at $500 throughout)

Your account balance is $1,000. You open a few trades that lock up $500 of margin in total:

Status	Floating P&L	Equity	Margin level	What happens
Just opened	0	1,000	200%	All normal
Floating loss grows	−500	500	100%	Hits the margin call level: you’re warned to add funds or reduce your positions
Loss keeps growing	−750	250	50%	Hits the stop out level: the platform starts closing your positions

All the stop out “saves” is that last $250. By the time the platform steps in, the account has already lost three quarters of its money, and you didn’t decide a single step of it. If you’d set a stop loss in advance and used the formula from part two to keep each trade’s loss to an amount you can afford, you usually wouldn’t even reach the margin call level.

Abstract illustration: a warm orange liquid level falling inside a translucent tube, first passing a gold ring and then nearing a deep red ring, symbolising the margin level reaching the margin call level and then the stop out level

Why accounts blow up: three common causes

1. Lot size too big, using up your free margin

Take the same $1,000 account. If you use $900 of margin right from the start, your margin level is only about 111%, and a $100 floating loss is enough to hit the margin call level (again, illustrative numbers). The more margin you use, the bigger your positions usually are and the more you gain or lose with each tick — so you start closer to the line and move towards it faster. This is what part two meant: just because the margin fits doesn’t mean the risk does.

2. No stop loss, so the floating loss keeps growing

Without a stop loss, the only exit this trade has left is the platform’s stop out level. Part three said margin is not a stop loss. One more thing to add here: neither is the stop out level.

3. Gaps: jumping past several lines at once

A gap is when price jumps straight from one quote to the next, with no chance to trade in between. It’s common when markets reopen after the weekend, or when major news is released.

Your margin level can drop from above the margin call level to below the stop out level in one go, before any warning can reach you. Positions are closed at whatever price is available at that moment, so you may be left with even less, and in extreme cases your equity can even go negative. That’s what the negative balance protection covered in part three is for — whether you have it, and how it applies, depends on the platform and the regulations that apply where you are.

How to avoid it: three questions to ask

There’s no fixed ratio you can simply copy, but there are three questions you can ask yourself before placing an order:

Is my exit decided by my stop loss, or am I waiting for the platform to decide?
Did I work out my lot size backwards from “the most I’m willing to lose”, or from “how many lots my margin still allows”?
Where will my margin level be when my stops are about to be hit? Add up what each trade would lose if it ran to its stop, subtract that from your equity, then divide by your used margin. If the result is close to the margin call level, or even below the stop out level, the platform may act before your stop loss does.

Common mistakes

1. Adding funds to hold on as your first response to a margin call

Adding funds is one option, but it only raises your margin level. It doesn’t make a wrong trade right; it just pushes the possible loss further down the road. When you get the warning, go back to the question from part four first: does your reason for this trade still hold?

2. Watching each trade’s loss but not the whole account

Each trade may only look a little down, but margin level is calculated on all your open positions combined. When several trades move against you at the same time, your margin level falls much faster than it seems when you look at them one by one.

Check your margin level in MT5

Press Ctrl+T to open the Toolbox and switch to the Trade tab.
Below the list of open positions is a line showing your account status: Balance, Equity, Margin, Free Margin and Margin Level. Note that “Margin” here means margin already in use; the money you still have available is Free Margin.
When your account hits the margin call or stop out level, this line turns red.
The exact margin call and stop out levels for your account are set out in the platform’s published trading conditions. If you’re not sure, ask the platform — don’t guess.

FAQ

What does it mean to blow up an account?

It’s everyday slang for being force-closed: when your margin level falls to the stop out level set by the platform, the platform closes your positions for you, usually starting with the trade losing the most. It isn’t a stop loss you set; it’s the platform’s last line of defence against your account going negative.

How is margin level calculated?

Margin level = equity ÷ used margin × 100%, where equity = account balance + current floating P&L. A growing floating loss reduces equity, and opening more trades increases used margin — both push your margin level down.

What’s the difference between a margin call and a stop out?

The margin call level is a warning: the platform reminds you to add funds or reduce your positions, and whether to close anything is up to you. The stop out level is the last line of defence: the platform closes positions for you directly. The exact percentages for both vary by platform and account type.

Can I still blow up my account if I set a stop loss?

Yes, it’s possible. In a gap, price can jump straight past your stop, so you’re filled at a worse price than your stop. And if the combined losses at your stops across several trades are too large, or you’ve used too much of your margin, your margin level can hit the stop out level before your stops are triggered.

Where do I check my margin level in MT5?

Press Ctrl+T to open the Toolbox. On the Trade tab, below the list of open positions, you’ll see Balance, Equity, Margin (used margin), Free Margin and Margin Level. When your account hits the margin call or stop out level, this line turns red.

Final thoughts

Part one said check the specifications first, part two said calculate your lot size first, part three said margin is not a stop loss, part four said put your stop where you’d be proven wrong, part five said it’s normal to be negative the moment you enter, and part six said count the swap as a cost if you hold overnight. This part covers the line your account eventually hits when none of that is handled: the stop out.

It won’t ask whether your reason for the trade still holds. It acts on your margin level alone.

Remember it this way: a stop loss is the exit you choose; a stop out is the exit the platform chooses for you — don’t let the second one come first.

Risk disclosure: CFDs are high-risk financial products and can lead to rapid loss of capital. Past performance does not guarantee future results. All strategies and backtests are for reference only and do not constitute investment advice. Actual margin call and stop out levels, and the order in which positions are closed, vary by platform, instrument and account type. In gaps or fast-moving markets, the actual fill price can be worse than expected. Please read our Risk Disclosure carefully before trading.