November 26, 2025
6 mins read
Anyone who buys or sells stocks knows how important it is to move fast when an opportunity comes along. One approach to make greater trades is to borrow money from your broker and trade on margin. But it also has a problem: the margin call.
A margin call is a warning that keeps you and your broker from losing money. When the value of your investments drops too low, your broker will ask you to deposit additional money or securities to your account to bring it back up to the required level.
We'll talk about what a margin call is, how it works, what causes it, and how to handle and avoid it in this blog. If you know how margin call trading works, you can make wise and sure choices in the stock market.
A margin call is when your broker tells you to put more money into your trading account. This happens when the value of your investments drops below a certain point, which is called the maintenance margin.
Your broker wants to make sure you have enough money to cover any probable losses, so think of it as a safety cushion.
For instance
Let's say you have ₹10,000 of your own money and borrow another ₹10,000 from your broker. That gives you ₹20,000 to trade with. If your broker tells you to have a 30% margin, you need to always have ₹6,000 (30% of ₹20,000) in your account. If the value of your investment goes down and your equity drops below ₹6,000, your broker will call you and ask you to put in additional money.
If the value of your securities goes down and your account balance falls below the broker's minimum margin requirement, you will get a margin call. Your broker will send you a notice, called a margin call, asking you to put in additional cash or securities to bring the balance back to what it should be.
If you don't meet the margin call, the broker can liquidate part or all of your assets to get back the money you borrowed. This is known as liquidation. This is something brokers do to keep themselves safe and make sure they don't lose money on your trades.
When the equity in your account falls below the maintenance margin threshold, you normally get a margin call. There are a number of reasons why this could happen:
A drop in the value of your investments on the market.
A lot of borrowing or leverage.
When the market suddenly becomes unstable or when something unexpected happens in the economy.
Holding hazardous or concentrated positions in one stock or sector.
For instance, if you trade with borrowed money and the price of the things you own declines dramatically, your account value may suddenly fall below the minimum margin. Your broker will send you a margin call when this happens, urging you to add more money or sell some of your assets to get things back in balance.
A margin call is vital because it keeps traders and brokers from losing a lot of money. You can make more money when you trade with borrowed money, but you might also lose more.
The margin call makes sure that traders have enough money in their accounts to cover any losses. It also helps brokers keep their risk levels low in markets that are often changing.
If you don't respond to a margin call, your broker can liquidate your investments to get back the money they lent you. This could cost you money and potentially limit your trading options in the future. Traders can make better decisions and manage their risks better if they know how margin calls work.
You often receive a margin call when your open trades move against you in the market, which can occur because of changes in the economy, political circumstances, and also due to investor sentiment.
For example, if you are using leveraged bets in the market and the collective stock price suddenly falls, your account balance can quickly fall below the margin that is required. At that point, your broker will send you a margin call notice.
Receiving a margin call can be nothing less than frustrating, especially in an unstable marketplace. But being able to learn how to remain calm and make an appropriate decision quickly can help in avoiding or limiting your losses.
If you get a margin call, don't freak out—there are a few methods to deal with it well:
Adding more money to your trading account is the easiest way to deal with a margin call. This raises your equity and helps you get your balance back above the necessary amount.
If you aren't able to add more cash, consider liquidating some positions. Cutting back on your position size will minimise the amount of borrowed funds you have to repay and will help you avoid a margin call.
Some brokers provide the option to use other assets or securities as collateral. The addition of extra assets that can be collateral will increase the amount of value in your account, which may help satisfy your margin call.
Upon receiving a margin call, always speak to your broker promptly. They may offer helpful recommendations or provide additional time to meet the margin requirements. Clear communication with your brokerage professional will ultimately help you work through margin calls more easily and with less stress.
Additional Read: How to Use Margin & Leverage to Boost Trading Returns?
You may take steps to lower your odds of getting a margin call, even though margin calls are a normal part of trading.
Follow strict standards for managing risk. Set stop-loss orders to keep your losses to a minimum, and don't use too much leverage. If prices drop too low, a stop-loss order will instantly sell your position, which protects your money.
Always know what you're trading. Before you enter the market, do your homework. A trader who knows a lot is less likely to make dangerous choices that could lead to a margin call.
Don't put all your money into one stock or deal. You lower your total risk and make margin calls less likely by putting your money into a variety of assets.
Your safety net is stop-loss orders. They help you automatically get out of a transaction when the price reaches a certain point, which keeps you from losing a lot of money and getting margin calls.
Keep an eye on your trading account and margin levels. You can respond quickly and make changes before a margin call happens if you keep a tight eye on your positions.
Anyone who deals with margin trading should know what margin calls are. If the market value of your investment hesitates to adhere to a certain minimum value level, your broker will contact you for more money or securities to deposit into your trading account, called a margin call.
Margin calls are essential for trade and broker activity to help you prevent larger losses and manage risk. Margin calls can be stressful, but knowing how to handle a margin call will help you manage the financial anxiety that comes with it. You have options of putting more new money into your trading account, liquidating the position or positions, securing an asset as collateral, or seeking some level of assistance from your broker.
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A margin call is when your broker tells you to put additional money or assets into your trading account because your balance is too low.
The time brokers provide you to respond to a margin call is different, although it normally falls between a few hours and a couple of days.
If you don't respond to a margin call, your broker can sell some or all of your investments to get back the money you borrowed.
Yes, you may do this by setting stop-loss orders, keeping an eye on your account balance, managing your risks prudently, and spreading your investments around.
Yes, margin trading can be dangerous because it uses borrowed money. It can raise both profits and possible losses.
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