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Trading Scenario: Margin Call Level at 100% and Stop Out Level at 50%
Step 1: Deposit Funds Into Trading Account
You start with a trading account balance of $50,000.
Step 2: Calculate Required Margin
You open a long position on the XAUUSD (Gold) with 1 standard lot (100 ounces). The required margin for this position is $15,000.
Step 3: Calculate Used Margin
The Used Margin is the margin required to maintain your open position, which is $15,000.
Step 4: Calculate Equity
Your initial account equity is the same as your account balance, which is $50,000.
Step 5: Calculate Free Margin
The Free Margin is the difference between your Equity and your Used Margin.
Free Margin = Equity – Used Margin
Free Margin = $50,000 – $15,000 = $35,000
Step 6: Calculate Margin Level
The Margin Level is the ratio of your Equity to your Used Margin, expressed as a percentage.
Margin Level = (Equity / Used Margin) x 100%
Margin Level = ($50,000 / $15,000) x 100% = 333.33%
XAUUSD (Gold) drops $200 per ounce!
The XAUUSD (Gold) pair starts to decline, and your floating loss increases to $20,000.
| Used Margin | Floating P/L | Equity | Free Margin | Margin Level |
|---|---|---|---|---|
| $15,000 (unchanged) | -$20,000 | $50,000 – $20,000 = $30,000 | $30,000 – $15,000 = $15,000 | ($30,000 / $15,000) x 100% = 200% |
Although the Margin Level has dropped below the 100% Margin Call Level set by your broker, your equity remains positive at $30,000.
XAUUSD (Gold) drops another $200 per ounce!
The XAUUSD (Gold) pair continues to move against your position, and your floating loss increases by an additional $20,000.
| Used Margin | Floating P/L | Equity | Free Margin | Margin Level |
|---|---|---|---|---|
| $15,000 (unchanged) | -$20,000 – $20,000 = -$40,000 | $50,000 – $40,000 = $10,000 | $10,000 – $15,000 = -$5,000 | ($10,000 / $15,000) x 100% = 66.67% |
Even though the Margin Level has dropped below the 50% Stop Out Level set by your broker, your equity remains positive at $10,000.Trade Now 
Broker Actions
In this scenario, since your equity remains positive, your broker should not close your trading account or liquidate your open position. Instead, they may:
- Issue a Margin Call, requiring you to deposit additional funds to bring your Margin Level back above the 100% Margin Call Level.
- If you do not respond to the Margin Call, they may start gradually reducing your open position to bring your Margin Level back above the 50% Stop Out Level.
As long as your equity remains positive, your broker should not take any drastic actions that would result in you losing more than your initial deposit.
The key points are:
1. The Margin Call Level is still set at 100%, and the Stop Out Level is still set at 50%.
2. The example continues to use the XAUUSD (Gold) instrument, where the floating loss increases as the price of gold drops.
3. Even with the larger floating loss, the equity remains positive throughout the scenario, preventing the trading account from being closed or positions from being liquidated entirely.
The broker’s actions would be the same as in the previous scenarios, where they would likely issue a Margin Call and gradually reduce the open position if the trader does not respond, in order to bring the Margin Level back above the required thresholds.
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