The amount of your own money locked up as collateral to open and hold a leveraged position.
Margin is your good-faith deposit when you open a leveraged trade. If your broker requires 1% margin, you need $1,000 in your account to control a $100,000 position. That $1,000 is your "used margin" — it's locked up until you close the trade.
Your "free margin" is what's left in your account that you can still use to open more trades. As a trade goes against you, your unrealized loss eats into your free margin. Run out of free margin and you hit a margin call.
Margin and leverage are two sides of the same coin. 1:100 leverage means 1% margin requirement. 1:50 leverage means 2%. 1:500 means 0.2%. Lower margin requirements = more leverage = more room to blow up.
During the Jan 2015 Swiss franc shock, EUR/CHF moved 30% in minutes. Traders with 500% margin levels still got wiped out because the gap blew through their stops.
Frequently asked about margin
What is a margin in trading?+
The amount of your own money locked up as collateral to open and hold a leveraged position.
When will I see margin used in real trading?+
At the bottom of your broker platform: "Balance / Equity / Margin / Free Margin / Margin Level."
What is the most common mistake traders make with margin?+
Thinking the margin amount is what you can lose. You can lose WAY more than your margin if the market gaps or the broker doesn't execute your stop. Margin is the collateral, not the max loss.
What do experienced traders know about margin that beginners don't?+
Watch your margin level (equity ÷ used margin × 100%). If it drops below 200%, you're dangerously close to a margin call. Pros keep it above 500% at all times.
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