Margin Call
A margin call is a broker's demand that an investor add cash or securities because the equity in a margin account has fallen below the required minimum.
When you buy securities with borrowed money, your broker requires you to keep a minimum amount of your own equity in the account, called the maintenance margin. Equity is the market value of your securities minus what you owe the broker. If prices fall far enough, your equity drops below that minimum and the broker issues a margin call.
To meet a margin call, you can deposit cash, transfer in other securities, or sell some holdings to reduce the loan. Brokers are not obligated to wait. In a fast-falling market, they can sell your positions without notice, at whatever prices are available, to bring the account back into compliance.
Margin calls often arrive at the worst moment, after a sharp decline, and forced selling can lock in losses.
Example: you buy $20,000 of stock with $10,000 of your own money and a $10,000 loan. Your broker requires 30% maintenance margin. If the holdings fall to about $14,300, your equity is about $4,300, roughly 30% of the account value. Any further drop triggers a margin call.