RADEX MARKETS Editorial Team
The RADEX MARKETS editorial team consists of seasoned financial professionals and market observers. Dedicated to delivering objective market summaries, macroeconomic insights, and educational content, the team strives to keep traders well-informed in a fast-paced financial environment.
AKTIEN
The account still shows a balance, the order goes in, and the platform sends it straight back: not enough free margin. Or a position closes itself while price is nowhere near the stop loss that was set. Both moments end in the same place, which is the row of figures along the bottom of the trading screen that nobody reads properly on the first day.
Balance, equity, used margin, free margin, margin level. Five numbers, and most traders can only define the first with any confidence. This article settles what each of them means and how they connect, then runs a single worked account through every section, so the same $5,000 and the same 5% margin requirement turn up in the free margin working, the margin level working and the position size table. By the end you should be able to look at your own platform and say what each figure is doing there.
Margin is not a fee. It is a deposit your broker locks when a position opens and releases when it closes, so the money leaves the available pile without ever leaving the account. Whatever stays unlocked is free margin, and that figure alone decides whether another position can be opened. Margin level is equity divided by used margin, multiplied by 100, and it is the percentage that shows how much room the account has left before the broker starts applying its own rules.
Want to see used margin and free margin move on a live account?
Forex margin is the minimum amount of funds a trader must deposit to open and maintain a leveraged position. It is a portion of the account balance that the broker sets aside as collateral for as long as that trade stays open, and it is returned to the account in full once the position is closed. Margin is not a trading fee or a transaction cost: nothing is charged, nothing is paid to anyone, and the figure is not spent.
Why brokers ask for it is straightforward enough. A leveraged position is larger than the money standing behind it, so the broker holds a slice of your funds as security against exposure it is effectively carrying on your behalf. That deposit is what lets an account hold a position larger than the money standing behind it. It also explains why the deposit is set by the broker and differs from one instrument to the next, since an instrument that tends to move further needs more security behind it.
The instant a position opens, part of the balance changes job. It is still your money and it is still sitting in the account, but the platform flags it as used margin and it cannot be committed anywhere else until that trade closes. What is left over becomes free margin, and free margin is the figure the platform checks the next time you try to open something.
Take the account this article carries throughout: a $5,000 balance, EUR/USD trading at 1.1000, and a margin requirement of 5%. Open one mini lot, which is 10,000 units of the base currency, and the position is worth $11,000 at that price. The deposit locked behind it is 5% of $11,000, or $550.
Before opening: balance $5,000, nothing locked, free margin $5,000
After opening: balance $5,000, used margin $550, free margin $4,450
Notice what has not happened. The balance is unchanged. No cost has been incurred and no funds have gone anywhere. The single difference is that $550 of the account now has a job, and the room the account has for anything else has fallen by exactly that much.
Leverage is a ratio between the size of a position and the money put up to hold it. Margin is what that ratio comes to in currency once an actual position is named. The two describe one relationship from opposite ends, which is why you can never change one without changing the other.
Item |
Margin |
Leverage |
|---|---|---|
| Nature | Deposit locked to open a position | Ratio between position size and deposit |
| Shown as | Currency amount | Ratio |
| Set by | Margin requirement on the instrument | The same requirement, expressed differently |
| What it changes | How much of the balance is tied up | How large a position the balance supports |
What your platform actually displays is a margin amount, because that is the figure which has to come out of the balance before anything can open. The ratio sits behind it as the conversion.
Read more：What Is Leverage in Forex and How Much Should You Use?
The margin requirement is the percentage of a position's value that has to be deposited to open it. Brokers set it, and it differs by instrument, so the same account can face one figure on a major currency pair and a higher one on something that moves more.
Free margin is account equity minus used margin. It is the part of the account that is not tied to any open position, and it does two jobs at the same time: it is what the platform draws on when you open something new, and it is the cushion that absorbs losses on whatever is already running.
Two separate forces move it, and only one of them is obvious. The first is you. Every position opened raises used margin and cuts free margin; every position closed hands it back. The second is price, and that is the one that catches people out: free margin is calculated from equity, which already includes open profit and loss.
Run the same account through it. With one mini lot of EUR/USD open and $550 locked, nothing has moved yet, so equity still matches the balance and free margin stands at $4,450. Now let price run 100 pips against the position. On a mini lot each pip is worth $1, so the open loss is $100.
Equity = $5,000 − $100 = $4,900
Used margin = $550, unchanged
Free margin = $4,900 − $550 = $4,350
Used margin did not move at all, because the deposit is fixed when the position opens and stays put until it closes. Free margin fell by exactly the size of the open loss, and it will keep falling for as long as that loss keeps growing.
Which brings up the question readers are usually asking underneath the definition: can free margin be withdrawn? Treat it as room to operate in. What the platform will actually release to your bank is a separate calculation, because part of the figure comes from unrealised profit that has not been banked and is still moving with every tick. The number you read at lunchtime may not be the number that exists when a withdrawal is processed, and the amount that can genuinely be taken out is whatever your platform's withdrawal page states once it has allowed for open positions.
These three get confused more often than any other set of figures on the screen, mostly because they agree with each other perfectly whenever nothing is open.
Figure |
What it counts |
Moves when |
|---|---|---|
| Balance | Closed positions only | A position is closed |
| Equity | Balance plus open profit and loss | Price moves |
| Free margin | Equity minus used margin | Price moves or a position opens |
Put the worked account against that table and the gap is easy to see. Balance ignores open profit and loss entirely, so it still reads $5,000 while the trade is $100 down. Equity has already recorded the loss at $4,900. Free margin takes equity and subtracts the $550 that is still locked. Most traders make their decisions off the balance, because it is the figure that looks like their money.
Margin level is equity divided by used margin, multiplied by 100, expressed as a percentage. It answers a single question: how many times over does the account's current equity cover the deposits already committed?
Margin level = (equity ÷ used margin) × 100
A formula on its own settles nothing, and most explanations of margin level stop right there. Substituting real figures into it is where the percentage starts to mean something, so here is the same account, before and after the loss.
Position open, price unmoved: ($5,000 ÷ $550) × 100 ≈ 909%
After the 100-pip loss: ($4,900 ÷ $550) × 100 ≈ 891%, both rounded to the nearest whole percent
Both readings are comfortable, and that is deliberate: the arithmetic is easier to learn on a healthy account than on a distressed one. What the two lines teach is the size of the step. One mini lot, 100 pips against you, and the level slides from 909% to 891%.
Margin level |
What it means |
What you can still do |
|---|---|---|
| Comfortable | Equity sits well above used margin | Open new positions normally |
| Tightening | Open losses are eating into equity | Hold existing positions only |
| At the broker's limit | Equity close to used margin | The broker may begin closing positions |
The figure falls by one of two routes, and each has a different cause behind it. The numerator drops when open losses drag equity down, which is the route every trader expects and watches for. The denominator rises when more positions are opened, because each new trade adds its own deposit to used margin regardless of how the existing ones are doing. That second route is quieter, and it is entirely self-administered. A trader scanning only for losses can be genuinely puzzled by a margin level that fell because of a position size they chose themselves half an hour earlier.
Margin level is the ratio of account equity to used margin, shown as a percentage. The higher the percentage, the more buffer the account still holds between its current equity and the deposits keeping its positions open.
Work this one backwards from the position rather than forwards from the balance. Take the instrument's margin requirement as a percentage, multiply it by the notional value of the position you are considering, and the product is what gets locked. Subtract that from equity and you have the free margin you would be left holding. Then ask the question that actually decides the trade: can what remains absorb the open loss this position could reasonably run before your exit is reached?
Here is the same $5,000 account at the same 5% requirement, set against four position sizes.
Position size |
Notional value |
Margin locked |
Free margin left |
|---|---|---|---|
| Micro (0.01 lot) | $1,100 | $55 | $4,945 |
| Mini (0.1 lot) | $11,000 | $550 | $4,450 |
| Two mini (0.2 lots) | $22,000 | $1,100 | $3,900 |
| Standard (1.0 lot) | $110,000 | $5,500 | Cannot be opened |
The column to read is the last one, and the row that teaches the most is the bottom one. A standard lot at this price demands $5,500 of margin against a $5,000 balance, so the deposit is larger than the whole account and the order is rejected before it ever reaches the market., because the requirement is bigger than the money available to meet it.
The three rows above it are the ones worth worrying about — precisely because all three go through. Free margin left drops from $4,945 on a micro lot to $4,450 on a mini and $3,900 on two minis; each step up takes another slice out of the same $5,000. Being able to open a position is not the same as being able to hold it. What settles that is the buffer standing behind the trade once the deposit has come out, and the buffer has to cover the cost of getting in as well as the loss the position runs while you wait for your idea to work.
Read more：What Is Spread in Forex? Formula, Calculation & Examples
A position that leaves $3,900 of free margin can sit through a long run against it and still be there when price comes back. One that leaves almost nothing has already made the decision about your exit before you have.
None of this is exotic. Four habits put ordinary accounts under pressure in ordinary weeks, long before anything dramatic happens, and every one of them comes down to reading the wrong figure at the wrong time.
The market causes none of those four. They come from not reading the account's own figures as the signals they are.
Read more：10 Forex risk management tips every trader should know
This is not a sudden event. Every figure covered above has been signalling it in advance, in order, for as long as the position has been open.
Where that threshold sits, what the warning looks like when it lands, and what can sensibly be done about it are a subject in their own right, and the article below takes them one at a time.
Read more：What is a margin call? Definition, triggers, and how to avoid it
Multiply the notional value of the position by the instrument's margin requirement as a percentage, and the product is what gets locked. On the account used throughout this article, one mini lot of EUR/USD at 1.1000 is worth $11,000, and a 5% requirement locks $550. Requirements differ by instrument, so the figure your own platform displays is the one that counts.
No single figure works for every account, because a level only means something next to the threshold your broker applies. A higher percentage means a thicker buffer, and that is all it means. What matters is how far the account currently sits from that threshold, which is a distance rather than a target.
Free margin and withdrawable balance are two different figures. Free margin includes unrealised profit and loss that keeps moving for as long as positions are open, so it can change between the moment you read it and the moment a withdrawal is processed. The amount that can actually be taken out is whatever your platform's withdrawal page states.
Used margin is the portion of the account locked behind positions that are already open. Free margin is the portion still available, either to open something new or to absorb losses on what is running. Together they add up to account equity exactly: on the worked account, the $550 locked plus the $4,350 free is the $4,900 of equity.
Losses are calculated against the size of the position rather than the deposit that opened it, so a sharp gap in price can produce a loss larger than the margin locked. Most retail accounts include mechanisms that step in as losses widen, although those are mechanisms rather than guarantees and they depend on there being a price to close at.
Retail forex trading is built around opening positions on margin, so there is no version of it that does without. What you can adjust is size: a smaller position locks a smaller deposit, which is why the micro row in the table above leaves so much more of the account free.
Four figures, one piece of arithmetic each. The margin locked is notional value times the requirement, which came to $550 on a mini lot of EUR/USD at 1.1000. Equity is the balance adjusted for open profit and loss, $4,900 once that trade was 100 pips down. Free margin is equity minus used margin, $4,350 at the same moment. Margin level is equity divided by used margin times 100, or 891%. All four read off the same account, and all four can be rebuilt from figures your own platform already displays.
The check to run before opening is how much buffer is left after the deduction, not whether the confirm button still works. Once the position is running, the level is the figure worth watching, and the balance will be the last one to tell you anything useful. Free margin is the number that gets overlooked most, because it looks like spare money right up until the session where it is the only thing standing between an open loss and a decision made by somebody else.
The RADEX MARKETS editorial team consists of seasoned financial professionals and market observers. Dedicated to delivering objective market summaries, macroeconomic insights, and educational content, the team strives to keep traders well-informed in a fast-paced financial environment.
Reviewed by RADEX MARKETS
Risk Warning
Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.
Related concepts:
Der Handel mit Derivaten und gehebelten Produkten ist mit hohen Risiken verbunden und kann zu Verlusten führen, die Ihre ursprüngliche Investition übersteigen. Lesen Sie vor dem Handel unsere Allgemeinen Geschäftsbedingungen (T&C) sowie das Product Disclosure Statement (PDS).
KONTO ERÖFFNEN