The Leverage Ladder, part 3 of 3.
Part 1 covers the caps by instrument; part 2 covers the professional opt-out that removes them.
Fifty Per Cent of What, Exactly
There is one number every EEA and UK retail CFD trader is subject to, and most of them have it wrong. Ask around and you will hear that your broker closes your positions when you have lost half your account. That is not the rule.
The rule, quoted from the regulator's own measures, standardises "the percentage of margin (at 50% of minimum required margin) at which providers are required to close out one or more retail client's open CFDs."
The trigger is 50% of the minimum required margin — the margin needed to open and hold your positions. It is not 50% of your equity, not 50% of your deposit, and not a threshold your broker sets at its own discretion. Getting this right changes where you think the floor is, usually by a lot.
Quoted from ESMA's product-intervention notice, verified at source 8 August 2026. ESMA's temporary measures were replaced by permanent national measures from 2019 onward; the close-out rule was carried into them.
Worked Through, With Numbers
The difference between the two readings is easiest to see on an account with a single position.
Say you deposit EUR 5,000 and open one position on a major pair at the maximum permitted 30:1. That position has a notional value of EUR 150,000 and requires EUR 5,000 of margin — you are fully committed.
| Reading | Where people think the floor is | Where the rule actually puts it |
|---|---|---|
| "50% of my account" | Equity falls to EUR 2,500 | — |
| The actual rule | — | Equity falls to 50% of EUR 5,000 required margin = EUR 2,500 |
On this account the two happen to coincide, which is exactly why the misreading survives: when you use all of your capital as margin, "half my margin" and "half my account" are the same number.
Now change one thing. Deposit EUR 10,000 and open the same EUR 150,000 position, so EUR 5,000 is margin and EUR 5,000 sits unused.
- The "half my account" reading predicts close-out at EUR 5,000 of equity.
- The actual rule triggers at 50% of the EUR 5,000 required margin — that is, when equity reaches EUR 2,500.
The real floor is half of what the folk version predicts, and you have twice as much room as you thought. The unused balance is not idle: it is what stands between your position and the close-out. This is the mechanical reason that funding an account above the bare minimum margin is a risk-management act and not merely a convenience.
Run it the other way and the same arithmetic bites. Open more positions with the same deposit and the required margin rises, which raises the close-out level in absolute terms while leaving you less spare equity above it. Stacking positions moves the floor up towards you from both directions at once.
How Much Loss You Can Absorb Before It Fires
That last point deserves its own numbers, because it is the one that decides whether a bad week ends in a forced closure or merely a bad week. Hold the deposit constant at EUR 10,000 and vary only what you have open.
| Open exposure | Required margin | Close-out trigger, at 50% of required margin | Loss you can absorb first |
|---|---|---|---|
| EUR 150,000 on one major pair | EUR 5,000 | equity of EUR 2,500 | EUR 7,500 |
| EUR 300,000 across two major pairs | EUR 10,000 | equity of EUR 5,000 | EUR 5,000 |
| EUR 150,000 major pair plus EUR 100,000 gold | EUR 10,000 | equity of EUR 5,000 | EUR 5,000 |
The first and second rows are the same deposit and the same instrument type. Doubling the exposure halves the loss the account can absorb before the firm is obliged to start closing you — from EUR 7,500 down to EUR 5,000. Nothing about your analysis changed. The only thing that changed was how much of your capital was committed as margin.
The third row makes the same point across instruments and is worth reading alongside the leverage ladder. Gold sits on the 20:1 rung, so EUR 100,000 of gold requires EUR 5,000 of margin — the same EUR 5,000 that EUR 150,000 of a major pair requires at 30:1. A position half the notional size consumes exactly the same margin and moves your close-out level exactly as far. Margin consumption, not headline position size, is what determines where your floor sits.
There is a useful single number hiding in this. Call the fraction of your equity tied up as required margin your margin utilisation. The share of the account you can lose before the rule fires is then one minus half your utilisation. At the 50% utilisation of the first row you can lose 75% of the account; at the 100% utilisation of the second and third rows you can lose 50%. Fifty per cent is the floor of that range, because you cannot commit more margin than you have equity — and it is where an account that always trades at maximum permitted size permanently sits.
That formula is worth committing to memory, because it converts a vague worry into a number you can check in seconds. If a close-out ever arrives sooner than you expected, margin utilisation is the first variable to look at. It is the one that moves the floor, and unlike the market, it is entirely within your control.
What "One or More" Means When It Fires
The wording is worth reading closely: the firm must close out "one or more" open CFDs. Not necessarily all of them.
In practice, brokers apply their own procedure for which positions go first — commonly the largest loser, though this varies by firm and platform, and it is set out in the firm's terms rather than in the rule. The obligation is to bring the account back above the threshold, not to flatten it entirely.
Two consequences follow that catch people out:
- A close-out is not necessarily the end of your trading day. Positions may survive it. If they do, they are still open, still moving, and can trigger the rule again.
- You do not choose the order. A hedged or paired structure can be dismantled asymmetrically, leaving you with the leg you did not want. If you trade correlated positions, read your firm's close-out policy before you need it.
It is also worth being clear that this is a backstop, not a stop-loss. The rule fires on the state of your whole account, at a level determined by your margin, at a price the market happens to be at that moment. A stop-loss fires on a specific instrument at a level you chose for a reason. Relying on the close-out rule to manage risk means outsourcing your exit to an arithmetic threshold that knows nothing about your thesis. Position sizing and risk management covers doing it deliberately instead.
Why This Rule Is the Reason the Other One Works
The close-out rule looks like a standalone protection. It is better understood as the mechanism that makes negative balance protection economically survivable for brokers.
Negative balance protection promises that a retail client cannot lose more than the money in their account. Left alone, that is an open-ended liability: any gap large enough to blow through an account leaves the broker absorbing the shortfall. Firms that price that risk honestly either charge for it or restrict who gets it.
The close-out rule shrinks the liability by forcing intervention early. If accounts are systematically brought back into line at half of required margin, very few of them ever approach zero, and the guarantee costs little to honour in normal conditions. The two rules were introduced together and function as a pair — one keeps accounts away from the cliff, the other covers the rare occasion when a market gaps straight past it.
Which also explains why both vanish together when you leave retail status. An elective professional client has neither, and the reason is not punitive: without the close-out obligation, the negative-balance guarantee would be a materially different product. That trade is set out in full in part 2.
Four Misreadings of the 50% Rule
"It closes me out at half my account balance." The trigger is half of *required margin*, not half of equity. The two coincide only when every euro you hold is committed as margin — which is the one specific case that makes the folk version look correct, and the case most beginners happen to be in. On any account carrying spare balance the real floor sits lower, sometimes a great deal lower.
"It is a stop-loss, so I do not need one." The rule fires on the state of the entire account, at a level set by your margin, at whatever price the market happens to be showing at that instant. It holds no view about the trade, the thesis or the instrument. Treating it as an exit strategy means handing the decision to an arithmetic threshold that knows nothing about why you entered.
"It guarantees I exit at that level." It guarantees the firm must act. It does not guarantee the price you receive. Close-outs execute at prevailing market prices, and the conditions that drive an account down to the threshold in the first place are frequently the conditions in which prices are moving fastest and spreads are widest. What slippage actually costs is the relevant reading, and it is relevant most of all right here.
"It means I can never lose more than half my margin." It means the firm must begin closing when equity reaches that point. Between the trigger and the execution the market carries on moving, and across a weekend gap it can travel a very long way before any close-out is possible at all. That residual gap is precisely the hole negative balance protection exists to fill — and precisely why the two rules are useless separately and effective together.
What to Check on Your Own Account
- Find your required margin, not your balance. Every platform displays it, usually as "used margin" or "initial margin". Half of that figure is your close-out level. If you have never looked at it, you do not currently know where your floor is.
- Check whether your broker sets a stricter level. The rule is a minimum standard. Firms may close out earlier than 50%, and some do. The number that applies to you is in your firm's terms, not in the regulation.
- Ask which positions are closed first, and on what basis. The rule says "one or more" and leaves the selection to the firm. Get the policy in writing before you hold anything correlated, hedged or paired, because that is when the order stops being an academic question.
- Ask how often the level is monitored. Continuous monitoring and periodic checks are not the same protection in a fast market. This is an operational detail that firms differ on and that is rarely on the marketing pages, so ask rather than assume.
- Check what your platform counts as equity. Unrealised profit and loss on open positions, and any pending charges such as overnight swap and rollover fees, can move equity while you are asleep and therefore move your distance to the trigger without any new decision from you.
- Confirm you are a retail client. If you elected professional status at any point, none of the above applies to you.
For how these rules fit together, see ESMA rules explained. For what happens on platforms operating outside them, 1000:1 leverage and what the extra zeros cost. And because close-out prices are execution prices, what slippage actually costs is directly relevant to what you receive when the rule fires.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. A majority of retail investor accounts lose money when trading CFDs — commonly disclosed at between 51% and 89%. The margin close-out rule is a regulatory backstop executed at prevailing market prices; it does not guarantee any particular exit level. Capital is at risk.
This article is for informational and educational purposes only and does not constitute financial, legal or investment advice. Close-out levels and the order in which positions are closed are set in your broker's terms; read them before relying on any figure here.