Trading Contracts for Difference (CFDs) can offer exciting opportunities to profit from market movements, but they also come with risks — and one of the most dreaded terms for any trader is the margin call. If you’re new to trading or trying to better understand risk management, this guide is for you.
What Is a Margin Call?
In simple terms, a margin call is a warning from your broker. It means your account equity has dropped below the required margin level to keep your open trades running. Think of it as your broker saying: “Hey, your account is running low — add more funds or we’ll start closing your positions.”
This usually happens when your losses exceed a certain threshold. Because CFD trading is leveraged, small market moves can quickly turn into large losses.
Why Do Margin Calls Happen?
Here are the main reasons margin calls occur:
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High Leverage Usage: While leverage can boost your profits, it also amplifies losses.
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Market Volatility: Sudden price swings can quickly erode your account balance.
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Inadequate Monitoring: Not keeping a close eye on your trades or ignoring stop-losses can put your margin at risk.
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Low Account Balance: Trading with a small margin cushion leaves you more vulnerable.
What Happens When You Get a Margin Call?
When you receive a margin call, your broker will usually:
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Notify you via email, platform alert, or app notification.
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Request you to deposit more funds into your trading account.
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Start closing your open positions automatically if no action is taken, beginning with the most unprofitable trades.
How to Avoid or Manage Margin Calls
Here’s how you can trade smarter and reduce your risk of hitting a margin call:
✅ 1. Use Stop-Loss Orders
Set stop-losses to automatically close trades before your losses get too big. This is one of the most effective ways to protect your capital.
✅ 2. Don’t Max Out Leverage
Use leverage wisely. Higher leverage increases risk, especially during volatile market conditions. Start small and scale up as you gain experience.
✅ 3. Monitor Your Margin Level
Keep an eye on your margin level (%) in your trading platform. A healthy margin level is often above 100%, ideally above 200%.
✅ 4. Keep a Buffer
Always maintain extra funds in your account as a cushion. Don’t trade with your full balance.
✅ 5. Stay Updated with Market News
Economic announcements or political events can cause sudden price movements. Being informed helps you react early.
Conclusion
A margin call doesn’t mean your trading career is over — it’s simply a sign that you need to reassess your risk management strategy. By using sensible leverage, managing your trades actively, and never trading with money you can’t afford to lose, you can reduce the chances of ever receiving one.
Trading CFDs is a skill that takes time, discipline, and education. Understand your risks, prepare for the unexpected, and trade smart.
