The formula
margin level = equity ÷ used margin × 100
$5,000 of equity against $2,000 of used margin is a margin level of 250%. It falls when equity falls, and it also falls when you open another position — because that raises the denominator.
Two thresholds sit below:
- Margin call, commonly at 100%, where the broker warns you and may block new positions.
- Stop-out, commonly between 20% and 50%, where the broker closes positions itself.
Both vary by broker and by regulator, so use your own figures rather than the defaults.
Pips, because that is the unit you think in
Money-based thresholds are hard to act on mid-trade. The row that matters converts them:
pips to the threshold = (equity − threshold equity) ÷ pip value
With $5,000 equity, $2,000 used margin, a 50% stop-out and a $10 pip value: the stop-out sits at $1,000 of equity, so there is $4,000 of room — 400 pips.
Now put that beside your stop-loss. If the stop is 40 pips away, the broker is nowhere near relevant. If you are holding three correlated positions and the buffer is 60 pips, the broker's exit arrives before yours, and it closes whatever it chooses rather than what you would have chosen.
That comparison — buffer against stop, in pips — is the only useful reading of a margin level, and it takes one glance once the number is in front of you.
Why it falls faster than expected
Two things move the ratio at once, and traders usually track only one.
A floating loss reduces equity, which is the obvious half. Opening an additional position increases used margin, which lowers the level without the market having moved at all. A trader who adds to a position while already at 150% can be at the call before the next candle closes.
This is also why the danger concentrates in correlated positions. Three long EUR positions are one bet in three costumes: they lose together, so the equity drop and the margin usage arrive simultaneously, and the level falls at three times the rate the position count suggests.
What a stop-out actually does
It is not an orderly reduction. The broker closes positions at the market, on its own schedule, usually starting with the largest loser — which is normally the one you would have most wanted to give room to.
It also happens in whatever liquidity exists at that moment, which during a fast move is worse than the quoted spread. A stop-out is therefore reliably more expensive than the stop you would have taken voluntarily, and the whole purpose of tracking this number is to never find out by how much.