Risk & Money ManagementAvailable MarginUsable Margin
Free Margin
The portion of equity not tied up as collateral, available to open new positions or absorb losses on existing ones.
What Free Margin means
Free margin is calculated as Equity minus Used Margin. Because equity itself equals balance plus the floating profit or loss of open positions, free margin changes with every tick even when the trader does nothing. Opening a new position reduces free margin by that position's requirement; closing one releases it. Platforms display the figure alongside balance, equity and margin level, and it is the number that determines whether a new order can be accepted at all.
Free margin doubles as the cushion that stands between an account and forced liquidation. As floating losses accumulate, free margin falls first, then turns negative once losses exceed the unencumbered portion of equity, at which point the margin level is already approaching the broker's call and stop-out thresholds. It is worth remembering that free margin is not the same as withdrawable cash: pending settlements, unrealised losses and bonus credits can all mean the amount a trader can actually take out is lower.
Worked example
An account with a 10,000 dollar balance holds half a lot of EUR/USD using 1,808 dollars of margin and showing a 200 dollar floating loss. Equity is 9,800 dollars, so free margin is 9,800 minus 1,808, or about 7,992 dollars.
Related terms
- Used MarginThe total collateral currently locked across all open positions and pending margined orders.
- EquityThe live value of a trading account: balance plus the floating profit or loss of every open position.
- Margin LevelEquity divided by used margin, shown as a percentage; the ratio brokers monitor to decide margin calls and stop outs.
- MarginThe portion of account equity a broker sets aside as collateral to open and maintain a leveraged position.
- Account BalanceThe cash value of an account reflecting only completed transactions, before open positions are marked to market.
Frequently asked questions
What does Free Margin mean in forex trading?
The portion of equity not tied up as collateral, available to open new positions or absorb losses on existing ones.
How does Free Margin work in practice?
Free margin doubles as the cushion that stands between an account and forced liquidation. As floating losses accumulate, free margin falls first, then turns negative once losses exceed the unencumbered portion of equity, at which point the margin level is already approaching the broker's call and stop-out thresholds. It is worth remembering that free margin is not the same as withdrawable cash: pending settlements, unrealised losses and bonus credits can all mean the amount a trader can actually take out is lower.
What is an example of Free Margin?
An account with a 10,000 dollar balance holds half a lot of EUR/USD using 1,808 dollars of margin and showing a 200 dollar floating loss. Equity is 9,800 dollars, so free margin is 9,800 minus 1,808, or about 7,992 dollars.
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