What is a margin call?
Last updated August 2026
Short answer
The mechanism is designed to protect the lender, not the borrower, and it acts precisely when selling is worst for you.
The arithmetic that produces one
Buy $20,000 of stock with $10,000 of your own money and $10,000 borrowed. Your equity is 50%.
A 30% fall takes the holding to $14,000. The loan is still $10,000, so equity is $4,000, or about 29%.
A further slide toward the maintenance requirement triggers the call, and the loan has not moved throughout.
How to meet one
Deposit cash, which reduces the loan directly.
Deposit marginable securities, which increases the collateral.
Sell positions, which reduces both sides. This is the option most people end up taking, and doing it yourself is generally better than having it done for you.
What the broker may do
Liquidate without prior notice, under the terms of the margin agreement.
Choose which securities to sell, which may not be the ones you would have chosen.
Raise the maintenance requirement on a specific holding at any time, which can create a call without any price movement at all.
Try it in Walnut
Walnut connects to your brokerage and reads what you hold, including margin balances, so leverage is visible before a decline makes it obvious.
Why it happens at the worst moment
Calls cluster in falling markets, which is when selling crystallises the largest loss.
Forced selling by many holders at once pushes prices lower, which triggers further calls.
An investor liquidated near a bottom loses the position and misses the recovery, which is how a temporary decline becomes a permanent loss.
Staying out of range
Borrow well below the maximum. The permitted amount is a limit rather than a target.
Keep cash outside the account, so a call can be met without selling anything.
Avoid leveraging a concentrated position, since a single company falling 40% is ordinary and a diversified portfolio falling 40% is rare.
The regulatory floor is not the broker's floor
Exchange rules set a maintenance requirement commonly around 25%, and brokers routinely apply higher house requirements.
House requirements can be raised on specific securities, or across the board, at any time and without notice.
So the level at which a call arrives is set by your broker rather than by regulation, and it can change while you hold the position.
Sources
Maintenance requirements, liquidation rights and the risks of margin borrowing are published by FINRA at Margin Accounts, with SEC guidance at investor.gov. Walnut is informational and is not an investment adviser. This guide is educational and not personalized investment advice.
FAQ
What is a margin call?
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A demand from your broker to restore equity in a margin account after the value of your securities has fallen below the maintenance requirement. You can meet it by depositing cash, depositing securities, or selling positions to reduce the loan.
What triggers one?
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Your equity falling below the maintenance requirement, commonly 25% under exchange rules and frequently higher at the broker's discretion. It can also be triggered by the broker raising the requirement on a security you already hold.
How long do I have to respond?
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Whatever the broker allows, which may be a few days or no time at all. The margin agreement generally permits immediate liquidation, and in volatile markets brokers use that right rather than waiting.
Can the broker sell without telling me?
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Yes. The agreement you signed permits selling without prior notice, choosing which securities go and accepting whatever price the market offers at that moment.
Can I lose more than I invested?
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Yes. If the liquidation does not cover the loan, you owe the difference. That is the specific risk margin adds over investing with your own money, where the worst case is losing what you put in.
What is the best way to avoid one?
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Borrow far less than you are permitted to, and keep cash available outside the account. The people who get liquidated are generally those who borrowed the maximum and had nothing left to post when prices moved.
Does the loan shrink when the market falls?
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No, and this is the whole problem. Your debt stays fixed while the collateral loses value, so every decline comes entirely out of your equity rather than being shared with the lender.
Do margin calls happen to ordinary investors?
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Regularly, and usually to people who did not think of themselves as leveraged. Enabling margin for convenience and then holding a concentrated position is the common route into one.
Is the maintenance requirement fixed?
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No. Exchange rules set a floor commonly around 25%, and brokers apply higher house requirements that they can raise at any time, including on a specific security you already hold. The level at which a call arrives is set by your broker, not by regulation.
What happens if the sale does not cover the loan?
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You owe the difference to the broker as an ordinary debt. That is the specific risk margin adds over investing with your own money, where the worst outcome is losing what you put in rather than owing more.
Does a margin call affect my credit?
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The loan itself is not typically reported to consumer credit bureaus, and a liquidation is handled inside the account. An unpaid deficit after liquidation is a debt the broker will pursue, and that can end up in collection like any other.
Can I stop a liquidation once it starts?
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Rarely, and not reliably. Once the broker begins selling to restore the ratio, it is acting under the agreement rather than waiting for instructions. Depositing funds fast enough can end it, which is why holding cash outside the account is the practical defence.