Leverage, margin call and stop-out: how you can lose your whole deposit in a day

What leverage is in plain words

Leverage lets you open a trade larger than the money in your account. The broker blocks only part of the amount as collateral, called margin. Leverage of 1:30 means margin is 1/30 of the position: to trade USD 30,000, you only need to block USD 1,000 in your account.

The trap is that profit and loss are calculated on the whole position, not on the margin. A 1% price move on a USD 30,000 position is USD 300, or 30% of your deposit. Hence the main rule: leverage does not multiply your money, it multiplies your risk.

Margin call and stop-out: what happens when the price moves against you

The broker constantly calculates your margin level: your account funds including the current loss, relative to the blocked margin.

• Margin call is a warning that your margin level has fallen below a threshold set by the broker. You are asked to top up the account or close some positions.
• Stop-out is the broker closing your positions by force when the margin level falls to the minimum threshold. For retail clients of EU brokers, ESMA set this threshold at 50% of the minimum required margin. Positions are closed automatically, without your consent, at the current price.

Example: a USD 1,000 deposit and 1:30 leverage

You open a USD 30,000 position in a currency pair, using your whole deposit as margin. Here is what happens if the price moves against you.

So losing half your deposit does not take a market crash: a 1.67% move is enough, and moves like that are routine in the currency market over a few weeks.

The higher the leverage, the smaller the move that knocks you out

If you use your whole deposit as margin, the price move that triggers a stop-out equals 50% divided by the leverage. The move that wipes out the entire deposit is 100% divided by the leverage.

With 1:500 leverage, a 0.1% price move closes the position with half your money gone. For currency pairs that is ordinary noise within an hour. That is why high leverage is not «a chance to earn more» but almost a guarantee of losing your deposit quickly.

Leverage limits set by the EU regulator

After analysing retail client losses, ESMA has since 2018 limited the leverage on CFDs that EU brokers offer to retail clients:

ESMA also requires positions to be closed at 50% of the required margin and introduced negative balance protection: a retail client cannot lose more than they have in the account. Unregulated companies frequently offer leverage of 1:500 or more and no such protection. That is one more reason to check a broker: how to do it in the NSSMC registers is explained in our guide on how to check a broker.

Why you can lose more than you have in the account

A stop-out does not always execute at the price you expect. If the market opens after the weekend with a sharp price jump, a so-called gap, the position is closed at the first available price. For example, on a USD 100,000 position (a USD 1,000 deposit at 1:100 leverage), a 3% gap means a USD 3,000 loss, three times the deposit.

With negative balance protection, the loss is limited to your USD 1,000. Without it, the broker may demand that you pay the difference. So before opening an account, check that your contract includes this protection.

How to use leverage without losing your deposit

1. Count your position size relative to your account, not the broker's leverage. A USD 3,000 position on a USD 1,000 deposit is effective leverage of 1:3: a 1% move costs 3% of the account, and the price has to move 16.7% for you to lose half your deposit.
2. Limit risk per trade to 1-2% of your account and size the position from the distance to your stop loss. How to do it, with a formula and examples, is explained in our article on risk management.
3. Set a stop loss before entering a trade, rather than waiting for a stop-out. A stop loss closes the position where you decided; a stop-out closes it where the broker decided.
4. Do not hold highly leveraged positions over the weekend or before major news, when gaps are likely.
5. Check your contract for the margin call and stop-out levels, negative balance protection and the broker's licence.

In short

• Leverage lets you open a position larger than your deposit, but the loss is calculated on the whole position.
• A margin call is a warning; a stop-out is a forced close-out. Under ESMA rules, a stop-out happens at 50% of the required margin.
• If you use your whole deposit, 1:30 leverage needs only a 1.67% move to trigger a stop-out, and 1:500 needs 0.1%.
• In the EU, retail leverage is capped: 1:30 for major currency pairs, 1:2 for cryptocurrencies, with negative balance protection.
• What matters is not the broker's maximum leverage but your position size relative to your account and a stop loss set in advance.

Figures in this article

• Retail CFD accounts losing money, lower bound74%
  ESMA data, 2018
• Retail CFD accounts losing money, upper bound89%
  ESMA data, 2018

Checked against official sources on October 30, 2026. If a figure changes, we update the article and the «Updated» date changes automatically.

Sources

1. ESMA - ban on binary options and CFD restrictions for retail clients: leverage limits, 50% margin close-out, negative balance protection (27.03.2018)
2. NSSMC - how to check a company's reliability using the Commission's registers (11.08.2026)

This article is for education only and is not investment advice or a call to trade. Trading CFDs, forex and other leveraged instruments carries a high risk of losing money quickly. Margin call and stop-out levels are set by the broker; check them in your contract.