Margin is a deposit, not a fee
When you open a leveraged trade, your broker sets aside part of your balance as margin. It is returned when you close the trade, adjusted for profit or loss.
Required margin = position value ÷ leverage
Example: 0.10 lots of EUR/USD at 1.0850 is a position worth $10,850. With 1:100 leverage the required margin is about $108.50.
The numbers on your platform
| Term | Meaning |
|---|---|
| Balance | Money in the account from closed trades, deposits and withdrawals |
| Equity | Balance plus or minus open profit and loss |
| Used margin | Margin locked by open trades |
| Free margin | Equity − used margin |
| Margin level | Equity ÷ used margin × 100% |
Margin call and stop out
If losing trades push your margin level down to your broker's margin call level (often around 100%), you get a warning. If it keeps falling to the stop-out level (often 20-50%), the platform starts closing your positions automatically.
Example
- Balance $500. You open trades using $250 margin.
- The trades lose $250. Equity is now $250, margin level 100%: margin call.
- Losses reach $375. Equity $125, margin level 50%: stop out begins.
The practical lesson
If you are watching your margin level, your positions are probably too large. With sensible position sizing and a stop loss on every trade, margin calls should almost never happen.