Free margin

Free margin (sometimes called usable or available margin) is the cushion left once the broker has set aside the margin needed for your open positions.

• Free margin = [equity](/glossary/equity) − used margin

Because equity includes floating profits and losses, free margin shrinks as open trades move against you and grows as they move in your favour. If free margin falls below zero, equity is lower than the margin you are using, the margin level drops below 100% and you can no longer open new positions.

Example

Illustrative figures: equity is $4,000. You open one standard lot of EUR/USD at 1.1000 with 30:1 leverage, so used margin is 110,000 ÷ 30, about $3,667.

• Free margin: 4,000 − 3,667 = $333
• At roughly $10 a pip, a move of about 33 pips against you wipes out the free margin
• Margin level at that point: 3,667 ÷ 3,667 = 100%

With a broker whose stop-out level is 50%, positions would start being closed once equity fell to about $1,833, a further move of roughly 183 pips. That sounds like room, but it means a single trade could cost more than half the account before anything stops it.

Had the same trader opened one mini lot instead, used margin would be about $367, free margin about $3,633, and the same 33-pip move would cost about $33.

Common misconception

A large free margin figure is not permission to trade bigger. It only tells you the broker will let you open more; it says nothing about how much you can afford to lose. Position size is better set from the distance to your stop and the amount you are willing to risk, which is what the position size calculator does. The leverage and margin guide explains the relationship in full.