Margin

Margin is the money your broker locks up while a leveraged trade is open. It is not a charge: when you close the position, the margin is released back to your free balance, plus or minus whatever the trade gained or lost. The amount depends on the position's size and the leverage allowed on that instrument.

The formula is simple: required margin = position value divided by leverage (or position value times the margin percentage).

Example

Illustrative figures: you buy 1 standard lot of EUR/USD (100,000 euros) at 1.1000. The position is worth 110,000 dollars. As an EU retail client, leverage on this major pair is capped at 30:1, which is a margin rate of about 3.33%. Required margin is 110,000 divided by 30, or roughly 3,667 dollars. If your account holds 10,000 dollars, about 6,333 dollars remain as free margin to absorb losses or open other trades.

The margin calculator does this for any pair, size and leverage.

Key terms around margin

• Used margin: the total locked up by all open positions.
• Free margin: equity minus used margin, what is left to absorb losses.
• [Margin level](/glossary/margin-level): equity divided by used margin, as a percentage. Brokers watch this to decide on a margin call or a close-out.

Common misconception

Many new traders think that the margin is the most they can lose. It is not. Gains and losses are calculated on the full 110,000-dollar position, so a 1% move against you costs about 1,100 dollars, nearly a third of the margin in the example. Our guide to leverage and margin explains why the margin requirement says nothing about how much risk you are taking.