🧱 Basics·beginner

Margin

The amount of your own money locked up as collateral to open and hold a leveraged position.

Margin is your good-faith deposit when you open a leveraged trade. If your broker requires 1% margin, you need $1,000 in your account to control a $100,000 position. That $1,000 is your "used margin" — it's locked up until you close the trade. Your "free margin" is what's left in your account that you can still use to open more trades. As a trade goes against you, your unrealized loss eats into your free margin. Run out of free margin and you hit a margin call. Margin and leverage are two sides of the same coin. 1:100 leverage means 1% margin requirement. 1:50 leverage means 2%. 1:500 means 0.2%. Lower margin requirements = more leverage = more room to blow up.

Real trade example

During the Jan 2015 Swiss franc shock, EUR/CHF moved 30% in minutes. Traders with 500% margin levels still got wiped out because the gap blew through their stops.

Related terms

Leverage

beginner

Borrowed money from your broker that lets you control a large position with a small deposit.

Margin Call

beginner

The broker's warning (or automatic closeout) when your account loses too much and can no longer support your open trades.

Free Margin

beginner

The portion of your account equity that's NOT being used as margin for open trades — what's available to open new positions.

Equity

beginner

Balance plus or minus your current floating P&L — what you'd have if you closed every trade right now.

Balance

beginner

The total cash in your trading account, not counting any open-trade P&L.

Minor Pair

intermediate

A forex pair made up of two major currencies that does NOT include the US dollar — like EUR/GBP or AUD/JPY.

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