How CFD Margin Works and How to Avoid a Margin Call

For example, if you want to open a £10,000 CFD position on the UK 100 with a 5% margin requirement, you only need £500 in your account to open that position.

How Does Margin Work in Practice?

When you open a CFD position, your broker calculates the required margin based on:

• The total size of your position (number of contracts × price)
• The margin rate for that instrument (set by the FCA for retail clients)

The margin is held or "locked" in your account for as long as the position remains open. Your remaining free margin is the portion of your account balance available to open new positions or absorb losses.

Key margin terms to understand:

Term                                              Definition

Required margin                  The deposit needed to open a specific position

Used margin                        Total margin currently locked across all open positions

Free margin                         Account balance minus used margin — available for new trades

Margin level                         Account equity divided by used margin, expressed as a percentage

Margin call                          Warning triggered when your margin level falls below a set threshold

Stop out level                     The point at which positions are automatically closed to prevent further losses

What Is a Margin Call?

A margin call is a warning from your broker that your account equity has fallen to a level where it can no longer adequately support your open positions. It is triggered when your margin level, the ratio of your account equity to your used margin drops below a predefined threshold.

When you receive a margin call, you have two options:

1. Deposit additional funds into your account to restore your margin level
2. Close one or more open positions to reduce your margin requirement

If you do neither and your margin level continues to fall to the stop out level, your broker will begin automatically closing your positions starting with the largest losing position until your margin level recovers.

What Is the Stop Out Level?

The stop out level is the margin level at which your broker automatically begins closing your open positions. It exists to protect you from losing more than the funds in your account, a requirement for FCA-regulated brokers offering negative balance protection to retail clients.

Different brokers set different stop out levels — typically between 20% and 50% margin level. Always check your broker's specific thresholds before opening positions.

FCA Margin Requirements for Retail Clients

The FCA sets maximum leverage limits for retail CFD traders, which directly determine the minimum margin rates across different instrument types:

Instrument                       Max Leverage             Minimum Margin Rate

Major forex pairs                      1:30                                    3.33%

Minor forex pairs                      1:20                                     5%

Major indices                            1:20                                     5%

Commodities (excl. gold)          1:10                                    10%

Gold                                          1:20                                     5%

Individual shares                       1:5                                       20%

Professional clients may be eligible for higher leverage and lower margin requirements, but this comes with the loss of negative balance protection and other retail safeguards. Learn more on how to start CFD trading before considering professional status.

A Margin Call Example

Let's say you open a CFD position on the US500 index:

• Position size: 10 contracts at £4,500 per contract = £45,000 total value
• Margin rate: 5%
• Required margin: £2,250
• Your account balance: £3,000
• Free margin: £750

The market moves against you by 2%, reducing your position value by £900. Your account equity is now £2,100  below your required margin of £2,250. Your margin level has dropped below the threshold and you receive a margin call.

At this point you either deposit funds to bring your equity back above the required margin, or close the position and realise the loss.

How to Avoid a Margin Call

Managing margin effectively is one of the most important skills in CFD trading. Here are the most effective ways to protect your account:

Never use your full available margin. Opening positions that use 100% of your available margin leaves no buffer for adverse price movements. A common rule of thumb is to use no more than 10-20% of your available capital on any single trade.

Use stop-loss orders. A stop-loss automatically closes your position at a predefined price level, capping your maximum loss on a trade before it can threaten your margin. This is the single most effective tool for protecting against margin calls. Learn about CFD trading strategies that incorporate disciplined stop-loss placement.

Monitor your margin level regularly. Keep a close eye on your margin level, especially during periods of high market volatility — earnings announcements, central bank decisions, and geopolitical events can cause rapid price movements.

Reduce position sizes during volatile periods. If markets are moving unpredictably, smaller position sizes reduce your margin exposure and give your trades more room to breathe.

Avoid overtrading. Opening too many positions simultaneously increases your total used margin and reduces your free margin buffer — leaving your account more vulnerable if multiple positions move against you at once.

Understand the instruments you trade. Different instruments carry different margin requirements and volatility profiles. Individual share CFDs require 20% margin and can move sharply on company-specific news. Major forex pairs require only 3.33% margin but can be affected by macroeconomic events. Read our guides to forex trading and commodity trading to understand the specific risk profiles of each market.

Margin vs Leverage: What's the Difference?

Margin and leverage are two sides of the same coin but are expressed differently:

• Margin is expressed as a percentage of the total position value that you must deposit (e.g. 5%)
• Leverage is expressed as a ratio showing how much larger your position is than your deposit (e.g. 1:20)

A 5% margin requirement is equivalent to 1:20 leverage. A 10% margin requirement is equivalent to 1:10 leverage. The lower the margin requirement, the higher the leverage — and the higher the risk.

Understanding this relationship is fundamental to managing your exposure responsibly. For a deeper explanation, read our full guide to what leverage is.

Does Negative Balance Protection Apply to Margin Calls?

Yes — for retail clients with FCA-regulated brokers, negative balance protection means you cannot lose more than the funds deposited in your trading account. Even if a position gaps through your stop out level in a fast-moving market, your broker is required to limit your losses to your account balance.

This protection does not apply to professional clients, which is an important consideration when evaluating whether to apply for professional status. Read our guide on how to choose the best CFD broker to understand what protections to look for.

Risk Warning

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Frequently Asked Questions

What happens if I don't meet a margin call?
If you do not deposit additional funds or close positions when a margin call is triggered, your broker will automatically begin closing your open positions at the stop out level to protect your account from further losses.

Can I lose more than I deposit in a CFD account?
As a retail client with an FCA-regulated broker, negative balance protection means your losses are capped at your account balance. You cannot go into negative equity. This protection does not apply to professional clients.

What is free margin in CFD trading?
Free margin is the portion of your account equity not currently tied up in open positions. It represents the funds available to open new trades or absorb losses on existing positions without triggering a margin call.

How is margin different from a deposit?
Margin is not a fee, it is your own capital held as collateral. When you close a position, any unused margin is released back into your free margin. A deposit, in the traditional sense, simply refers to funding your account.

What is a good margin level to maintain?
Most experienced traders aim to keep their margin level above 200-300% — well above the typical margin call threshold. This provides a comfortable buffer against adverse market moves without limiting your ability to open new positions.

Does margin apply to ETFs and shares?
Standard ETFs and shares purchased outright do not use margin — you pay the full value of the investment. Margin only applies when trading leveraged products such as CFDs. For a comparison of the two approaches, read our guide to ETFs vs Shares.