What Is Margin in Forex? Used, Free Margin and Margin Level

The key margin terms at a glance

Term	Meaning	Formula
Balance	Account value after closed trades, deposits and withdrawals; excludes open positions	—
Equity	Account value including open profit/loss	balance + floating P/L
Required margin	Collateral needed to open a position	position value ÷ leverage
Used margin	Total margin held for all open positions	sum of required margins
Free margin	Equity not tied up as margin	equity − used margin
Margin level	Equity relative to used margin, in %	equity ÷ used margin × 100

Each term is explained below.

What is required margin?

Required margin is the collateral a broker blocks to open a position. Brokers express it either as a leverage ratio or as a margin requirement percentage — two views of the same number (30:1 leverage = a 3.33% margin requirement).

required margin = position value in account currency ÷ leverage

required margin = position value in account currency × margin requirement (%)

Position value in your account currency is the number of units multiplied by what one unit of the base currency (the first currency in the pair) is worth in your account currency. For EUR/USD on a USD account, that is simply the EUR/USD price.

Worked example

1 standard lot of EUR/USD at 1.1000 on a USD account, 30:1 leverage (a 3.33% margin requirement):

Position value = 100,000 × 1.1000 = $110,000 → required margin = $110,000 ÷ 30 = $3,666.67

Use the margin calculator for other pairs and account currencies.

What is used margin?

Used margin is the total required margin of all open positions. It rises when you open trades and is released when you close them.

What is equity?

Equity is your balance plus or minus the floating profit or loss of open positions. Balance changes only when trades are closed or money is deposited or withdrawn; equity changes with every price move.

What is free margin?

free margin = equity − used margin

Free margin is the equity that is not tied up as margin. It limits the size of new positions you can open and is the buffer that absorbs losses on open positions.

What is margin level?

margin level = equity ÷ used margin × 100%

Margin level shows equity relative to the margin in use. Brokers compare it with their margin call and stop-out levels to decide when to warn you and when to close positions.

Example: how margin changes as a trade moves

One position, three moments

Balance $10,000. You open the position above (used margin $3,666.67).

1. At entry: equity $10,000 · free margin $6,333.33 · margin level 273%
2. Trade is 100 pips in profit (+$1,000): equity $11,000 · free margin $7,333.33 · margin level 300%
3. Trade is 150 pips in loss (−$1,500): equity $8,500 · free margin $4,833.33 · margin level 232%

Losses reduce equity, which reduces both free margin and margin level. If losses keep growing, the margin level eventually reaches your broker’s thresholds.

The example keeps used margin constant for simplicity. In practice, required margin can change while a position is open — for example when the price or the conversion rate to your account currency moves, or when a broker changes its margin requirements, as some do around weekends and major events.

Margin call and stop out

Brokers typically set two thresholds based on margin level:

• Margin call level: a warning that equity is running low relative to used margin. Depending on the broker, this may be an email or notification, or simply a warning or status change in the trading platform.
• Stop-out level: the level at which the broker starts closing positions automatically, in the order set by its liquidation policy.

For retail clients in the EU and UK, rules require brokers to close out one or more positions when account equity falls to 50% of the total required margin for open positions. Read more in what is a margin call?

How to interpret free margin

A large free margin means more equity is available beyond what open positions require. It does not indicate how much risk is appropriate: free margin also serves as the buffer that absorbs losses on positions already open, so using it to open more positions reduces that buffer.