Liability
A financial obligation or debt owed by an individual or entity.
Definition
A liability is any financial obligation that must be settled in the future. In trading, liabilities include margin requirements, unrealised losses on open positions, and contractual obligations from derivatives. Understanding liabilities is critical for risk management because they represent claims on your capital that reduce available equity.
How It Works
- Opening a leveraged position creates a margin requirement liability on your account
- Unrealised losses reduce free margin and available equity
- Swap charges accruing overnight add to liabilities on the paying side of the rate differential
- If liabilities exceed equity, the broker issues a margin call or liquidates positions
Trading Tips
1
Track total liabilities (margin used + unrealised losses) against equity at all times
2
Keep margin utilisation below 50% to leave a buffer for adverse moves
3
Factor in overnight swap costs as a recurring liability when planning multi-day trades
Related Terms
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