A regulatory requirement in several jurisdictions that a retail CFD or forex account be closed out when equity falls to 50% of the margin required for the open positions.
The rule exists because broker-set thresholds used to vary from generous to non-existent. Regulators including ESMA in the EU, the FCA in the UK and ASIC in Australia set a uniform floor for retail clients, applied per account rather than per position so a single winner cannot mask a portfolio of losers.
It sits alongside the leverage caps and negative-balance-protection in the same rule sets. A broker may close out earlier than 50% if its own stop-out-level is higher, but it may not let a retail account run below it.
Clients categorised as professional under professional-client-classification fall outside these retail protections, which is the trade-off for the higher leverage that category allows.
Example: required margin across three positions is $6,000. The account is closed out when equity touches $3,000, regardless of which position is causing the loss.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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