Margin Call & Stop Out

Using margin to trade can be a great way to make your money work harder for you, as you can make profits that are usually only possible with a much larger investment. However, with this benefit also comes the risk of suffering greater losses if the trade moves against you. You may also end up losing more than what you have in your account.

To prevent this from happening, we have margin call and stop out policies in place whereby your positions will be closed if you do not have sufficient funds to keep them open.

At S.A.M. Trade, the margin call is set at 100% and stop-out level is set at 50%.

Margin Call Policy – 100.00%

You enter a margin call when your free margin has been used up or Percentage of Equity/Used Margin is at 100.00%

Free Margin: USD$ 0.00
Percentage of Equity/Used Margin: 100.00%

Shown on MT4 as Free: 0.00 / 100.00%

You will be unable to open new positions or place new trades when you enter a margin call. Additional deposits would be required to place new trades.

Stop Out Policy – 50.00%

When your Percentage of Equity/Used Margin goes below 50.00%, your losing position will be closed to prevent you from incurring more losses. This is when a stop out happens.

Example of a Margin Call & Stop Out Situation

You have a cash balance of USD 1,500.00 in your account with a leverage of 1:100, or a margin of 1%. You place a trade to buy 1 standard contract of EUR/USD, at Ask Price of 1.23840.

Used Margin: Contract Size * Lot Size * Price * Margin %
You now have Used Margin of 100,000 * 1.00 * 1.2384 * 1% = USD 1,238.40
Free Margin: Balance – Used Margin
You now have a Free Margin of USD (1,500.00 – 1,238.40) = USD 261.60
Amount of Free Margin allows you to only have room for a drop of 26.1 pips before you enter a Margin Call

Margin call shown on MT4:
Balance: 1,500.00 USD ; Credit 0.00 ; Equity: 1,238.40 ; Margin: 1,238.40 ; Free: 0.00 / 100.00%

No new trades can be placed when Percentage of Equity/Used Margin is below 100.00% this is when Margin Call happens.

If there are no new deposits and the markets continue to go against you. You only have room for another drop of 50.0% of your Used Margin before Stop Out happens.

50.00% of Used Margin is USD 1,238.40 / 2 = USD 619.20 which is essentially another 61.92 pips.

Therefore, the total number of pips allowed for EUR/USD to fall from start of trade:

Free Margin + 50.00% of Used Margin

USD 261.60 + USD 619.20 = USD 880.80 which is essentially another 88.08 pips

Stop Out shown on MT4:
Balance: 1,500.00 USD ; Credit 0.00 ; Equity: 619.20 ; Margin: 1,238.40 ; Free: -619.20 /50.00%

Your position will be closed to prevent you from incurring more losses when Percentage of Equity/Used Margin is below 50.00% this is when Stop Out happens.

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