Risk & Money ManagementInitial MarginMargin Requirement
Margin
The portion of account equity a broker sets aside as collateral to open and maintain a leveraged position.
What Margin means
Margin is the collateral a broker requires before it will open a leveraged position, and it is not a fee or a cost. The amount is derived from the position's notional value divided by the leverage ratio, or equivalently the notional value multiplied by the margin percentage. When the position is closed the collateral is released back into free margin. Brokers usually distinguish initial margin, needed to open, from maintenance margin, the lower level that must be sustained to keep the position open without intervention.
Margin is expressed in the account's denomination, so for instruments quoted in another currency the requirement moves with the exchange rate as well as with price. Requirements are also tiered: many venues raise the percentage for very large positions, for exotic pairs, and ahead of weekends or major economic events. Traders should treat published margin percentages as a floor rather than a fixed contract, and should never plan a position on the assumption that the requirement will remain unchanged for the life of the trade.
Worked example
Half a standard lot of EUR/USD at 1.0850 carries a notional value of 54,250 dollars. Under a 1:30 retail cap the required margin is about 1,808 dollars; under a 1:500 offshore ratio the same position needs only about 109 dollars.
Related terms
- LeverageThe ratio between the notional size of a position and the margin a trader must post to open and hold it.
- Used MarginThe total collateral currently locked across all open positions and pending margined orders.
- Free MarginThe portion of equity not tied up as collateral, available to open new positions or absorb losses on existing ones.
- Margin LevelEquity divided by used margin, shown as a percentage; the ratio brokers monitor to decide margin calls and stop outs.
- EquityThe live value of a trading account: balance plus the floating profit or loss of every open position.
Frequently asked questions
What does Margin mean in forex trading?
The portion of account equity a broker sets aside as collateral to open and maintain a leveraged position.
How does Margin work in practice?
Margin is expressed in the account's denomination, so for instruments quoted in another currency the requirement moves with the exchange rate as well as with price. Requirements are also tiered: many venues raise the percentage for very large positions, for exotic pairs, and ahead of weekends or major economic events. Traders should treat published margin percentages as a floor rather than a fixed contract, and should never plan a position on the assumption that the requirement will remain unchanged for the life of the trade.
What is an example of Margin?
Half a standard lot of EUR/USD at 1.0850 carries a notional value of 54,250 dollars. Under a 1:30 retail cap the required margin is about 1,808 dollars; under a 1:500 offshore ratio the same position needs only about 109 dollars.
Trade with a regulated broker
Understanding the terminology is the cheap part. The expensive part is choosing a counterparty whose execution, financing and withdrawal behaviour match what the marketing implies. Every broker below has been reviewed with a funded live account, and each review states which legal entity and which regulator applies to the account you would actually open.
Check the licence on the regulator's own register before you deposit — our regulators directory explains what each authority enforces, from leverage caps to compensation limits.