What Is a Margin Call and How to Avoid One
A margin call is a demand to top up funds when a leveraged position moves against you. Here’s how it works.
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A margin call is a demand from your broker to add funds (or reduce positions) when the margin backing your leveraged trade falls below the required level. Ignore it, and your positions can be squared off automatically.
Why margin calls happen
When you trade with leverage — via MTF, F&O or a margin pledge — your broker requires a minimum margin against the position. If the market moves against you, your losses eat into that margin, creating a shortfall. The broker then calls for more funds to restore the minimum.
What happens if you don’t meet it
If you don’t add funds in time, the broker can square off your positions to recover the shortfall — often at an unfavourable price — and peak margin penalties may apply. You don’t control the timing or price of a forced square-off.
How to avoid margin calls
- Use less leverage than the maximum allowed.
- Keep a cash buffer in your account beyond the bare minimum margin.
- Use a stop-loss so losses are capped before they trigger a call.
- Monitor positions actively if you’re leveraged.
Margin calls are a feature of leveraged trading, not a glitch — the safest protection is simply using less leverage. Education only, not advice.
