Margin is one of the most important concepts in leveraged trading — and one that trips up many beginners. Understand it, and you will know exactly how much you can trade and how to avoid having positions closed on you. This guide breaks down margin, free margin, margin level, and the margin call.
What is margin in forex?
Margin is the amount of your own money set aside to open and hold a leveraged trade. It is not a fee — it is a good-faith deposit that is locked while the trade is open and released when you close it. Margin is the flip side of leverage: the higher your leverage, the less margin you need.
How to calculate required margin
Required margin = position size ÷ leverage.
Example: to open 1 standard lot of EUR/USD (worth about $108,000) at 1:200 leverage, you need $108,000 ÷ 200 = $540 in margin.
The four terms you need to know
- Balance: your account cash, not counting open trades.
- Equity: balance plus or minus the profit/loss of open trades.
- Used margin: the total margin locked in your open positions.
- Free margin: equity minus used margin — what you have left to open new trades or absorb losses.
What is margin level?
Margin level shows how healthy your account is:
Margin level = (equity ÷ used margin) × 100%
A high margin level is safe; a falling one means your losses are eating into your margin.
Margin call and stop-out
SCapitalFX uses two protective levels based on your margin level:
- Margin call at 100%: a warning that your equity has dropped to your used margin. Add funds or reduce positions.
- Stop-out at 50%: if your margin level keeps falling to 50%, positions are automatically closed (worst first) to stop further losses.
How to avoid a margin call
- Do not use all your free margin at once — keep a buffer.
- Always trade with a stop-loss so losses can’t spiral.
- Use sensible position sizes (risk 1–2% per trade).
- Watch your margin level, especially around big news.
Risk warning: Trading on margin carries a high level of risk and can lead to rapid losses. You could lose some or all of your invested capital. Never trade with money you cannot afford to lose.
Frequently asked questions
Is margin a fee or a cost?
No. Margin is a deposit that is locked while your trade is open and returned to your free margin when you close it.
What happens at a margin call?
It is a warning that your account is at risk. If the margin level keeps falling to the stop-out level (50%), positions are closed automatically.
How much margin do I need?
Divide the position size by your leverage. A $20,000 position at 1:200 needs $100; the same position at 1:50 needs $400.
What is the difference between margin and free margin?
Used margin is locked in open trades; free margin is what is left over to open new trades or withstand losses.
Trade with margin in mind
Open a free demo to see margin and margin level update live as you trade. Learn the basics first in our beginners guide.