The portion of your account equity that's NOT being used as margin for open trades — what's available to open new positions.
Free margin is the difference between your account equity and your used margin. It's the amount available to open new trades or absorb losses on existing ones. As trades go in your favor, equity rises and free margin grows. As trades go against you, equity falls and free margin shrinks. When free margin hits zero or negative, you've hit a margin call.
The formula: free margin = equity − used margin. If you have $10,000 equity and $2,000 used margin (from open positions), free margin is $8,000. You can open new trades with that $8,000 of available capacity.
Monitoring free margin is critical for traders running multiple positions. You don't want to use 100% of your free margin on one trade — that leaves zero room for the next setup or for an existing position to draw down without triggering a margin call.
During the Jan 2015 CHF unpeg, traders with low free margin got margin called within seconds as EUR/CHF gapped 30%. Traders with healthy free margin survived the move and were able to continue trading.
Frequently asked about free margin
What is a free margin in trading?+
The portion of your account equity that's NOT being used as margin for open trades — what's available to open new positions.
When will I see free margin used in real trading?+
On every broker dashboard, right next to balance, equity, and used margin.
What is the most common mistake traders make with free margin?+
Using all your free margin on a single trade. That leaves no buffer if the trade goes against you. A 5% drawdown can become a margin call instantly.
What do experienced traders know about free margin that beginners don't?+
Keep at least 50% of your free margin as buffer at all times. If you run out of margin headroom, you have no flexibility to manage drawdowns or take new opportunities.
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