Margin meaning in simple words
Margin is the part of your own money that a broker sets aside while a leveraged position is open. It is not a fee and it is not spent. It is a deposit that guarantees the position. When you close the trade, the margin is released back to your free funds, and your balance changes only by the profit or loss of the trade and its costs.
Margin exists because of leverage. With leverage you control a position larger than your deposit. The broker asks you to lock up a share of the position's value, and that share is the margin. If you are new to leverage, read What is leverage first.
Margin does not limit your loss. You can lose more than the margin set aside for a trade, up to your whole account balance. Leveraged forex and CFD trading can lose money fast.
The required margin formula
The margin requirement is the amount needed to open a position. For forex and most CFDs it is calculated like this:
Required margin = lots × contract size × open price ÷ leverage
Each part means:
- Lots – the size of your trade. See What is a lot and Lot sizes.
- Contract size – how many units of the asset make up a lot. It is set in the instrument specification and differs between forex pairs, metals, indices and other CFDs.
- Open price – the price at which the position is opened. For forex pairs, the margin is first counted in the base currency, so the price is used when converting.
- Leverage – the ratio the broker applies to that instrument and account.
Some brokers express the requirement as a margin percentage instead of leverage. It is the same idea: the percentage is the share of the position's value you must set aside.
Use the calculator to see the actual number for your trade:
Fill in the empty fields to see the result.
Enter the instrument, lot size, price, leverage and account currency. The calculator shows the required margin with the inputs you used, so you can check each part of the formula.
Which currency margin is in
Margin is first calculated in the margin currency of the instrument and then converted into your account currency.
- Forex pairs. The margin currency is usually the base currency, the first currency in the pair. For EURUSD, margin is counted in euros and then converted. See How to read a currency pair.
- Metals, indices, energies and other CFDs. The margin currency is usually the quote currency of the instrument, often the US dollar for XAUUSD or US100.
- Account currency. If your account is in a different currency, the platform converts the margin at the current rate. Small differences between your manual estimate and the platform figure often come from this conversion.
Used margin vs free margin
Once trades are open, the platform shows several related figures:
| Term | What it means |
|---|---|
| Balance | Money in the account, not counting open trades |
| Equity | Balance plus or minus the floating profit or loss of open trades |
| Used margin | The total margin locked by all open positions |
| Free margin | Equity minus used margin, the amount available for new trades or to absorb losses |
| Margin level | Equity divided by used margin, shown as a percentage |
Free margin shrinks when open trades lose money and grows when they gain, even though used margin may stay the same. If free margin falls too far, the broker can issue a margin call and then close positions at the stop out level. More detail: Free margin, Margin level, Equity vs balance.
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How margin changes with price
Many traders assume margin is fixed once a trade is open. That depends on the instrument and the account currency.
- Margin currency equals account currency. For USDJPY on a USD account, margin is in US dollars from the start, so it stays the same in your account currency as the price moves.
- Margin currency differs from account currency. For EURUSD on a USD account, margin is fixed in euros, but its value in dollars rises and falls with EURUSD. Used margin shown on your platform moves with the rate.
- CFDs priced in a quote currency. For XAUUSD, the formula includes the price of gold. Many platforms recalculate margin at the current price, so a higher gold price means higher used margin for the same lot size.
The exact method of recalculation depends on the platform and broker settings. Check the instrument specification in your trading platform.
What else changes the margin requirement
For experienced traders, these points often matter more than the basic formula:
- Instrument-specific leverage. Metals, indices, energies and crypto CFDs often carry lower leverage than major forex pairs, so the same lot size needs more margin.
- Leverage tiers by equity or position size. Some brokers reduce available leverage as account equity or total exposure grows.
- Fixed margin periods. Brokers may raise margin requirements around major news, before weekends or around holidays, when price gaps are more likely. Read Weekends and holidays.
- Hedged positions. Some platforms charge reduced margin when you hold opposite positions on the same instrument; others charge for both. This is a setting, not a rule.
- Platform differences. MT4 and MT5 show margin in similar ways, but the calculation mode for each symbol is set in its specification. See MetaTrader 4 and MetaTrader 5.
If you trade with Exness, check the current margin and leverage conditions for each instrument in the Exness personal area or on the official site.
Margin and risk
Low required margin makes a position look small, but the profit or loss depends on the full position size, not on the margin. A trade that needs little margin can still move your equity sharply. Plan position size from the amount you are prepared to lose, using a stop loss and the calculators on Calculators, and read Risk management. Practising on a demo account shows how used and free margin behave without risking money.
Before trading from Pakistan, also read Law and regulators and Regulation and Safety.
Frequently asked questions
What is margin in forex?
It is the part of your funds locked as a deposit while a leveraged position is open. It is released when the position closes.
Is margin a cost or a fee?
No. Costs are the spread, commission and swap. Margin is held, not charged. See Total trading costs.
How do I calculate the margin requirement?
Multiply lots by contract size and open price, then divide by leverage, and convert into your account currency. The margin calculator on this page does this with your inputs.
Why is my used margin changing while the trade is open?
Either the margin currency differs from your account currency, or the instrument's margin is recalculated at the current price, as with many metals and index CFDs.
Can I lose more than the margin?
Yes. Margin is not a loss limit. Losses come from the full position size and can take your whole balance.
What happens if free margin runs out?
The broker may warn you with a margin call and then close positions at the stop out level, starting with the most losing trades on many platforms.