What it is
A margin call occurs when the value of securities in an investor's margin account falls below a specified percentage of the loan value, known as the maintenance margin. Brokers issue this call to ensure the investor maintains sufficient equity to cover potential losses. If the investor fails to meet the margin call by depositing more funds or selling assets, the broker may liquidate positions in the account to bring it back into compliance, often without prior notification.
Margin calls frequently appear in market downturns or periods of high volatility, signaling significant paper losses for investors using leverage. Following a margin call, forced selling by brokers can exacerbate market declines, creating a cascade effect. Retail investors tracking market sentiment and individual stock performance should be aware that widespread margin calls can indicate significant downside risk or forced liquidation events.
Why it matters
Failing to meet a margin call can lead to forced liquidation of your assets, potentially locking in losses and accelerating market declines. Understanding them helps manage risk.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice