Margin Requirement (also called Used Margin) is the amount of money that the broker locks on your account to keep your open positions.
This amount is calculated based on:
• the size of your position
• the leverage
• the current market price of the instrument
The larger the position or the lower the leverage, the more margin is required.
Free Margin is the amount of money on your account that is still available for opening new positions or covering floating losses.
Formula for calculating is the following:
Free Margin = Equity – Used Margin
Equity = Balance + Floating Profit/Loss
If Free Margin becomes too low, you may not be able to open new trades, and your Margin Level will decrease.
For example:
Account Balance: $1,000
You open a position that requires $200 margin, then:
Used Margin = $200
Free Margin = $1000 - $200 = $800
If the position starts losing money, Equity decreases, and Free Margin decreases as well.
Why it matters?
Free Margin shows how much “room” you have left for new trades and losses. When Free Margin approaches zero, your risk of reaching Margin Call or Stop Out increases significantly.
Always leave enough Free Margin as a safety buffer. Avoid using all available margin for new positions.