What is margin?
Margin is not a fee. It is part of your own balance that is reserved while a position is open, as a deposit against possible losses. It is released when you close the trade. The amount depends on the size of the position and the leverage available on the instrument.
Margin required = position value ÷ leverage.
Worked example at 1:100
| Position | Position value | Margin required |
|---|---|---|
| 0.01 lot (1,000 EUR) | $1,100 | $11 |
| 0.10 lot (10,000 EUR) | $11,000 | $110 |
| 1.00 lot (100,000 EUR) | $110,000 | $1,100 |
Different instruments carry different leverage, so the same dollar position needs different margin. On AlphaFX Pro forex and metals go up to 1:100, indices 1:50, energies 1:20, crypto 1:10, and share CFDs lower still.
Balance, equity, free margin and margin level
| Term | Meaning |
|---|---|
| Balance | Your account's cash, excluding open trades. |
| Equity | Balance plus or minus the floating profit or loss on open positions. |
| Used margin | The margin currently reserved by open positions. |
| Free margin | Equity minus used margin — what is available for new trades or to absorb losses. |
| Margin level | Equity ÷ used margin × 100%. The key number for margin calls and stop outs. |
Margin call and stop out
As losses grow, equity falls and so does your margin level. A margin call is a warning that the margin level has fallen to a set threshold. If it keeps falling to the stop-out level, the platform starts closing positions — usually the one with the biggest loss first — to stop the account going further negative. The thresholds are set out in your account terms.
- 01
Start
Balance $1,000. You buy 0.5 lot of EUR/USD at 1.1000. Used margin is $550, margin level 1,000 ÷ 550 = 182%.
- 02
Price falls 60 pips
Loss of 60 × $5 = $300. Equity is $700, margin level 700 ÷ 550 = 127%.
- 03
Price falls 100 pips
Loss of $500. Equity is $500, margin level 91%. Free margin is now negative and new trades cannot be opened.
- 04
Price keeps falling
When the margin level reaches the stop-out threshold, the position is closed automatically and the loss becomes real.
How to avoid margin calls
- Size positions from your stop loss, not from the margin available. Using all your free margin is the fastest route to a stop out.
- Always set a stop loss so a losing trade is closed at a level you chose, long before the stop-out level.
- Watch correlated positions — several trades against the US dollar can lose together.
- Be careful over weekends and around news, when prices can gap and margin levels can drop in one jump.
Adding funds to rescue a losing position avoids a stop out only by putting more money at risk. Decide your maximum loss before you trade.
Frequently asked questions
How do I calculate forex margin?
Divide the position value by the leverage. One lot of EUR/USD at 1.1000 is worth $110,000, so at 1:100 the margin is $1,100.
What is a margin call?
A warning that your margin level has fallen to a threshold because of losses on open positions. If it falls further to the stop-out level, positions are closed automatically.
What is margin level?
Equity divided by used margin, shown as a percentage. The lower it is, the closer the account is to a stop out.
Is margin a cost?
No. Margin is part of your balance reserved while a trade is open and released when it closes. Costs are the spread, any commission and swaps.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. This page is general information, not investment advice. Read the Risk Disclosure.