What is margin?
Margin is the amount of capital your broker requires you to hold as collateral when you open a leveraged position. It is not a cost — it is a deposit that is returned when you close the trade (minus any losses, plus any gains).
At 30:1 leverage on EUR/USD, the margin requirement is 3.33%:
- To open 1 standard lot (100,000 EUR/USD), margin required = $100,000 x 3.33% = $3,333
- To open 0.10 lot (10,000 EUR/USD), margin required = $10,000 x 3.33% = $333
Margin types
| Term | What it means |
|---|---|
| Required margin | The collateral needed to open the specific position |
| Used margin | The total margin locked up in all open positions |
| Free margin | Account equity minus used margin — what you can use for new trades |
| Margin level | (Equity / Used Margin) x 100. If this falls too low, broker intervenes. |
| Margin call | Warning when margin level falls to the broker’s threshold (typically 100%) |
| Stop-out | Automatic position closure when margin level hits the stop-out level (typically 50%) |
Margin call and stop-out — what actually happens
When your open positions move against you, your equity falls. Once equity approaches the used margin, you hit a margin call (a warning). If equity continues to fall to the stop-out level, the broker automatically closes your largest losing positions to prevent your equity from going negative.
FCA and ESMA-regulated brokers are required to offer negative balance protection — your account cannot go below zero. If the market gaps through your stop-loss and the broker closes you out at a worse price, the broker absorbs the loss beyond zero.