What is a margin call on a prop account?
Quick answer
A margin call is the warning, and sometimes automatic action, when an account's equity is no longer enough to support its open positions. In prop accounts, margin calls are rare in practice, because loss limits such as the daily and maximum loss breach the account long before margin is exhausted.
Detailed answer
In brokerage accounts, falling equity eventually triggers a margin call and then a stop-out, where the broker closes positions automatically to protect against a negative balance.
Why prop accounts are different
A typical challenge has a daily loss limit around 5% and a maximum loss around 10%. With normal leverage, an account would need to lose far more than that before margin ran out, so the loss rules act first.
When margin still comes into play
- New orders: an order that would need more margin than is free is refused.
- High leverage settings: with very high leverage and large positions, margin can become the binding limit for new trades.
- Multiple positions: margin used by existing positions reduces what is available for new ones.
What traders should be told
Explain in your FAQ that loss limits, not margin calls, are the normal way an account ends, and that orders may be refused for insufficient margin when positions are large. Traders coming from brokers sometimes expect a stop-out level and are confused when the account breaches first.
PropExecutor refuses any order that does not fit the account's free margin and shows equity, used margin, free margin and margin level in the terminal. Loss limits are enforced by the rule engine on every tick, which in practice ends an account before margin becomes an issue.
PropExecutor team · Updated
Related questions
All 17 questions in Market data and simulated execution · Every category