Margin
a.k.a. Required margin, Used margin
The deposit your broker locks up to keep a leveraged trade open. It is not a fee, but a good-faith slice of your account.
When you open a leveraged trade, your broker sets aside part of your balance as margin. It is collateral, not a cost: you get it back when the trade closes, plus or minus whatever you won or lost.
Margin requirements are usually shown as a percentage. 2% margin means 50:1 leverage; 1% means 100:1. The money left over is your free margin, the cushion that absorbs losses.
If losses eat through that cushion, you hit a margin call, and the broker may start closing your trades for you.
Margin on one standard lot
- Buy 1 standard lot of EUR/USD at 1.0850: position value = 100,000 × 1.0850 = $108,500.
- Margin requirement: 2% (50:1 leverage).
- Margin locked: $108,500 × 0.02 = $2,170.
Bottom line: You need $2,170 of your own money set aside to hold a $108,500 position.
Thinking margin is the most you can lose. You can lose far more than the margin on a trade, potentially your whole account.
Keep this word for good
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