What free margin means
When you open a leveraged trade, part of your money is set aside as a deposit for that position. This deposit is the used margin (also called required margin). See What is margin and What is leverage for the basics.
Free margin is the money left over. It is not tied to any open position, so you can use it to open new trades or to absorb losses on the trades you already have.
Free margin changes every time the price moves. That is because it is based on equity, which includes the profit or loss of open positions, and not on your balance. The difference is explained in Equity vs balance.
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The free margin formula
Free margin = Equity − Used margin
- Equity is your balance plus or minus the floating profit or loss of open positions.
- Used margin is the total margin held for all open positions.
If you have no open positions, used margin is zero and free margin equals your balance.
Calculate the used margin
Fill in the empty fields to see the result.
The calculator shows how much margin a position needs at a chosen leverage. That figure is the used margin you subtract from equity.
Worked example with the calculator
Follow these steps with your own figures:
- In the calculator, choose the instrument, for example EURUSD or XAUUSD.
- Enter the position size in lots. See What is a lot.
- Enter the leverage your account uses and your account currency.
- Read the result. This is the used margin for that position.
- Take your current equity from the trading platform and subtract the result.
| Item | Where it comes from |
|---|---|
| Equity (E) | Trading platform, account summary |
| Used margin (M) | Margin calculator result for your inputs |
| Free margin | E − M |
If you add a second position, run the calculator again for it and add both results together to get the total used margin.
Now let the price move against you. Your equity falls by the floating loss. Used margin stays roughly the same, so free margin falls by the same amount as equity. If the price moves in your favour, free margin rises.
Why free margin matters for opening trades
A new position can only be opened if your free margin covers the margin that position needs. If the calculator result for the new trade is larger than your free margin, the platform rejects the order, usually with a "not enough money" message.
Using almost all of your free margin is risky. Even a small price move against you can then push the account towards a margin call and a stop out.
Why free margin matters for withdrawals
A withdrawal takes money out of your balance, so equity and free margin fall by the same amount. Many brokers only let you withdraw up to your free margin while positions are open. This protects the margin that your open trades need. Check the exact rule in your broker's current conditions before you request a withdrawal.
Withdrawing while positions are open also lowers your margin level. That brings a stop out closer if the market moves against you.
Precise points for experienced traders
- Negative free margin. If floating losses push equity below used margin, free margin becomes negative. You cannot open new trades, and margin level is below the full-cover point.
- Margin level link. Margin level is equity divided by used margin, shown as a percentage. Free margin is the absolute amount and margin level is the ratio. Margin call and stop-out thresholds are set on margin level, not on free margin.
- What moves equity. Floating P/L, swaps and commissions charged on open positions all change equity and therefore free margin.
- What moves used margin. Changing leverage, partial closes and price changes on the instrument can change the margin held. For pairs not quoted in your account currency, so do conversion rates.
- Hedged positions. Some platforms charge reduced margin on opposite positions in the same symbol. Check how your account calculates it.
- Floating spreads. Wider spreads at the open reduce equity at once, so free margin starts slightly lower than your balance minus margin.
Risk and the legal position in Pakistan
Leveraged forex and CFD trading can lose money fast. Free margin can disappear within minutes in volatile markets, and a stop out can close positions at a loss. Read Risk management before trading with real money, and practise on a demo account first.
Pakistani readers should also know the official position: per the SBP, remitting foreign exchange to overseas forex/margin/CFD platforms is not allowed through any payment channel (FERA s.5(1)). In addition, per the SECP, offshore platforms have no Pakistani licence or oversight and offer no legal protection or recourse. Details are on Law and regulators.
Frequently asked questions
What is free margin in simple words?
It is the part of your equity that is not locked as margin for open trades. You can use it for new positions or to absorb losses.
What is the free margin formula?
Free margin equals equity minus used margin. Get the used margin from the margin calculator above.
Is free margin the same as balance?
Only when you have no open positions. With open trades, free margin depends on equity and on the margin held.
Why can't I open a trade when I have money in my account?
The new position needs more margin than your current free margin. Reduce the lot size or close other positions.
Can I withdraw my free margin?
Often only up to the free margin while trades are open. Withdrawing lowers your margin level, so check your broker's current rules first.
What happens when free margin reaches zero?
You cannot open new trades. If losses continue, margin level falls towards the margin call and stop-out levels.