When trading assets using Margin, understanding the health of your portfolio is paramount. In particular, you must understand Margin Call and Stop Out—two automated safety systems designed to limit capital damage during high market volatility.
Margin Call: The Risk Warning System
A Margin Call is a warning level triggered when your Equity (remaining collateral) drops to a specific percentage relative to your used margin. This notification serves as a prompt for traders to consider depositing more funds or closing some positions to restore a safe margin level.
The Margin Call thresholds at IUX are as follows:
Standard, Pro, and Raw Accounts: The warning is triggered when the Margin Level hits 40%.
Stop Out: Automated Liquidation to Prevent Debt
A Stop Out is the final measure where the system automatically closes your active trading positions. This occurs when your margin level reaches a critical point, preventing your account balance from falling into the negative.
On the MT5 platform, the Stop Out levels are structured as follows:
| Account Type | Stop Out Level | Impact |
|---|---|---|
| Standard | 20% | Positions are closed when margin level reaches 20%. |
| Raw | 20% | Positions are closed when margin level reaches 20%. |
| Pro | 20% | Positions are closed when margin level reaches 20%. |
Critical Precaution: For all account types, if the Margin Level is less than or equal to 100% during market break periods, the system may automatically close positions to protect the account from risks associated with "Price Gaps" upon market reopening, and may trigger Stop Out if it continues to fall toward the 20% threshold.
How to Avoid Margin Calls and Stop Outs
To maintain a healthy trading account, professional traders often follow these best practices:
Monitor Margin Level: Keep a close eye on the "Margin Level %" in your MT5 terminal.
Use Stop Loss: Always set a Stop Loss to define your maximum acceptable loss per trade.
Manage Leverage: While high leverage increases buying power, it also speeds up the path to a Margin Call if the market moves against you.
Buffer for Volatility: Ensure you have enough Free Margin to withstand temporary market swings.