Margin is the amount of capital a trader must deposit with their broker to open and maintain a leveraged position. Rather than paying the full value of a trade upfront, leverage allows traders to control a larger position with a smaller amount of their own funds. The required margin is determined by dividing the total position size by the leverage ratio offered by the broker.

Margin used percentage indicates how much of your account balance is currently committed to maintaining open positions. Keeping this percentage low is essential for managing risk, as a high margin usage leaves less free margin available to absorb losses or open additional trades. If margin usage reaches 100%, a margin call may be triggered, forcing positions to be closed.

Free margin is the difference between your account balance and the margin currently in use. It represents the funds available to open new positions or to absorb unrealized losses on existing trades. Monitoring free margin helps traders avoid margin calls and maintain healthy account management.

Formula

Required Margin = Position Size / Leverage Ratio

Margin Used % = (Required Margin / Account Balance) x 100

Free Margin = Account Balance - Required Margin

Example

If you want to open a $50,000 position with 10:1 leverage and have a $25,000 account balance, the required margin is $50,000 / 10 = $5,000. Your margin used percentage is ($5,000 / $25,000) x 100 = 20%, and your free margin is $25,000 - $5,000 = $20,000.