Margin is the amount your broker locks on your account as collateral to let you open a leveraged position. It directly depends on the allowed leverage for that asset.
Formula: Margin = Position size ÷ Leverage
- 30:1 leverage on EUR/USD: margin = 3.33% of position size
- 20:1 leverage on gold: margin = 5%
- 5:1 leverage on stocks: margin = 20%
Concretely, to open 1 lot of EUR/USD ($100,000) with 30:1 leverage, your broker locks $3,333 in margin.
Free margin vs used margin:
- Used margin: amount locked by open positions
- Free margin: capital still available for new positions or to absorb losses
- Margin level: Equity / Used margin × 100
When margin level falls below a threshold (often 100% then 50%), the broker triggers a margin call then a stop out (forced closure of losing positions to protect against negative balance). In the EU since 2018, regulated brokers must guarantee negative balance protection for retail clients.