Free Margin

To understand what free margin is in forex, start with two numbers your platform updates in real time: equity and used margin. Equity is your account balance plus or minus the floating profit and loss of every open position. Used margin (also called required margin) is the collateral the broker locks to keep those positions open. Free margin is simply what is left: Free Margin = Equity − Used Margin.

Free margin matters because it is the buffer that keeps your account alive. It serves two jobs at once. First, it is the capital available to open new trades — if free margin is too low, the platform rejects new orders. Second, it absorbs adverse price moves on existing positions; as floating losses grow, equity falls, and free margin shrinks toward zero. When free margin can no longer cover the maintenance requirement, the broker issues a margin call and eventually triggers a stop out, force-closing positions at market.

A worked example makes this concrete. Suppose your balance is $10,000 with no open trades, so equity and free margin are both $10,000. You open a position that requires $2,000 of margin. Used margin becomes $2,000 and free margin becomes $8,000. If that trade then shows a $1,500 floating loss, equity drops to $8,500 and free margin falls to $6,500 ($8,500 − $2,000). The required margin did not change, but your room to breathe did.

The related concept of margin level — equity divided by used margin, expressed as a percentage — is what brokers actually monitor for margin calls. Healthy accounts keep margin level well above 100% and keep a large free-margin cushion. Practical risk management therefore means understanding the risks: size positions so that a normal losing streak never drives free margin to zero, and treat a thinning free-margin balance as an early warning rather than waiting for the margin call.