Core Definition
What Is Margin in Forex Trading?
Margin is the amount of money a forex broker sets aside from your trading account when you open a leveraged position. It allows you to control a larger market exposure without paying the full value of the position upfront.
Margin is not a permanent cost or broker commission. It is temporarily allocated while the position remains open. When the trade is closed, the allocated margin is released and becomes available again.
In simple terms: if your account needs $1,000 to open a position worth $100,000, the $1,000 is the required margin, not the full value of the trade.
Used Margin
The amount currently allocated to open positions.
Free Margin
The funds available for new trades or unrealised losses.
Margin Level
The percentage relationship between equity and used margin.
Margin Calculation
How Is Required Forex Margin Calculated?
Required margin depends mainly on the total value of the position and the leverage available on the account. Higher leverage reduces the amount needed to open a position, but it does not reduce the market risk of that position.
Position value
100,000
USD
Account leverage
1:100
LEVERAGE
Required margin
1,000
USD
Calculation steps
Identify the total position value, which is $100,000 in this example.
Identify the account leverage, which is 1:100.
Divide $100,000 by 100. The required margin is therefore $1,000.
The final amount may depend on your account currency
A broker may automatically convert the required margin into your account’s base currency. The displayed amount can therefore vary slightly with the current exchange rate.
Practical Example
How Does Margin Affect a Trading Account?
Assume your trading account has a balance of $5,000 and you open a position requiring $1,000 in margin. That amount becomes used margin, while the remaining account equity determines your free margin.
Account balance
$5,000
Used margin
$1,000
Unrealised loss
-$200
Free margin
$3,800
How is free margin calculated?
Account equity
$4,800
5,000 − 200
Used margin
$1,000
Allocated to the trade
Free margin
$3,800
4,800 − 1,000
What happens if the unrealised loss keeps increasing?
As unrealised losses grow, account equity, free margin, and margin level decline. If the account reaches the broker’s margin-call threshold, trading restrictions may apply. At the stop-out level, the platform may begin closing positions automatically.
Account Metrics
What Are the Main Types of Margin?
A trading platform normally displays several margin-related figures. Understanding the difference between them helps you see how much capital is allocated to open positions, how much remains available, and how much room the account has to absorb market losses.
Used Margin
Margin Allocated to Open Trades
+
Used Margin
Margin Allocated to Open Trades
Used margin is the amount your broker sets aside to maintain currently open positions. It is not a trading fee, but it remains unavailable while those positions stay open.
- ✓Depends on position size and account leverage.
- ✓Increases when additional trades are opened.
- ✓Is released when the related position is closed.
Free Margin
Available Trading Funds
+
Free Margin
Available Trading Funds
Free margin is the equity remaining after used margin has been deducted. It can support new positions or absorb unrealised losses on existing trades.
- ✓Falls when unrealised losses increase.
- ✓Rises when trades gain value or positions are closed.
- ✓A severe decline may lead to a margin call.
Margin Level
Account Risk Indicator
+
Margin Level
Account Risk Indicator
Margin level is a percentage that compares account equity with used margin. Brokers use it to assess whether an account can continue supporting its open positions.
- ✓A higher percentage generally indicates more capacity.
- ✓The percentage falls as unrealised losses increase.
- ✓Broker margin-call and stop-out thresholds may depend on it.
Account Health
What Is Margin Level and How Is It Calculated?
Margin level is a percentage showing the relationship between account equity and used margin. Brokers use this percentage to assess whether an account has enough equity to continue supporting its open positions.
Account equity
4,800
USD
Used margin
1,000
USD
Margin level
480%
MARGIN LEVEL
500%+
More Available Capacity
Free margin is relatively strong and the account is generally further from broker risk thresholds.
100%–500%
Monitor the Account
The percentage may fall quickly if losses increase or additional positions are opened.
Below 100%
Higher-Risk Zone
The account may be approaching a margin call or stop-out threshold, depending on broker rules.
Margin thresholds vary by broker
One broker may set its margin-call level at 100% and its stop-out level at 50%, while another may apply different thresholds. Always check the conditions attached to your account type.
Risk Management
What Are a Margin Call and Stop Out?
A margin call occurs when an account no longer has the level of equity required to comfortably support its open positions. If losses continue and the margin level reaches the broker’s stop-out threshold, positions may be closed automatically.
⚠️Margin Call
Warning Threshold
+
Margin Call
Warning Threshold
A margin call happens when the account reaches a level defined by the broker. New trades may be restricted, and the trader may need to add funds or reduce exposure.
⛔Stop Out
Automatic Position Closure
+
Stop Out
Automatic Position Closure
A stop out occurs at a lower margin level. The platform may begin closing positions automatically, often starting with the trade showing the largest loss.
What can reduce free margin?
📉Unrealised Losses
+
Unrealised Losses
When open positions move against you, account equity and free margin decline, potentially bringing the account closer to a margin call.
⚡High Leverage
+
High Leverage
Higher leverage reduces the margin required for a position, but it also makes it easier to control a larger exposure and take more risk.
📦Oversized Positions
+
Oversized Positions
A position that is too large for the account can consume a substantial share of available funds and leave little room for market movement.
🧩Too Many Open Trades
+
Too Many Open Trades
Every additional position may require more margin. A large number of open trades can therefore reduce free margin quickly.
How can you reduce the risk of a margin call?
Common Questions
Frequently Asked Questions About Forex Margin
Is forex margin a fee paid to the broker?+
What is the difference between margin and leverage?+
What is free margin in forex trading?+
What does margin level mean?+
When does a forex margin call happen?+
Can a broker automatically close my trades?+
Trading Concepts Related to Margin
Understanding leverage, lot size, and spreads can help you estimate margin requirements, transaction costs, and account risk more accurately.
What Is Leverage in Forex?
Understand how leverage affects market exposure, margin requirements, and trading risk.
What Is a Lot in Forex?
Learn how lot size affects position value, margin, potential profit, and potential loss.
What Is Spread in Forex?
Learn how bid and ask prices create the spread and affect the cost of opening a trade.