Course 5 Margin · Lesson 4 of 13

Required, Used and Free Margin

Required margin is the deposit a single position needs, equal to its notional value divided by the leverage. Used margin is the total required margin of all open positions, and free margin is your equity minus used margin, which is what remains to open new positions or absorb losses. When free margin reaches zero you can open nothing more, and as it goes negative the broker begins closing positions.

What you'll learn

  • Calculate required margin for a position
  • Track used and free margin across an account
  • Understand how losses consume free margin
used marginfree marginopen lossequity = balance + open profit or loss = $4,000margin level = equity / used margin = 4,000 / 1,300 = 308%
Equity is balance plus open profit or loss; margin level is equity divided by used margin.

Required margin

Notional value divided by leverage, in the account currency. One standard lot of EUR/USD at 1.1000 is 110,000 dollars; at 1:30 the required margin is 3,667 dollars, at 1:100 it is 1,100, at 1:500 it is 220. If the account is in another currency the broker converts at its rate. The symbol specification on your platform states the margin percentage for every instrument, and it is often higher for exotics, indices and crypto.

Used and free

Open three positions requiring 1,100, 550 and 220 and used margin is 1,870. With equity of 5,000, free margin is 3,130. Free margin is what you have left to open more, and it is also the cushion that absorbs losses: as open positions lose, equity falls and free margin falls with it while used margin stays the same. When equity falls to used margin, free margin is zero and the margin level is 100 percent.

Margin during volatility

Brokers raise margin requirements before events such as elections and central bank decisions, sometimes doubling them, and around weekends. A position that fit comfortably on Thursday can produce a margin call on Friday afternoon with no price change at all. Read the broker's notices and keep free margin generous.

Example: An account filling up

Equity 2,000 dollars at 1:30. You open 0.2 lots EUR/USD, 22,000 dollars notional, margin 733. Free margin 1,267. You open 0.2 lots GBP/USD at 1.2500, 25,000 notional, margin 833. Used margin 1,566, free margin 434. Both trades move 40 pips against you: 80 dollars plus 80 dollars, equity 1,840, free margin 274. One more 40-pip move and free margin is near zero with two ordinary trades open. That is what running near full margin looks like, and it is why the next lesson's margin level matters.

Key takeaways

  • Required margin is notional over leverage; used margin is the sum across positions.
  • Free margin is equity minus used margin and absorbs losses.
  • Brokers raise requirements around events and weekends.
  • Keep free margin large; it is your buffer against a margin call.

Knowledge check

  1. One mini lot of USD/JPY, 10,000 dollars notional, at 1:50. What is the required margin?

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Trading forex, CFDs and other leveraged products carries a high risk of losing money. This lesson is general education, not advice. Risk disclosure.

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