Margin
Margin is the collateral a broker holds to open a leveraged position, roughly 3.3% of notional at 30:1.
Margin is the collateral held to open a leveraged position, about 3.3% of notional at 30:1. It is not a fee; it is locked equity returned when the position closes.
Margin is the collateral a broker requires to open and maintain a leveraged position. At 30:1 leverage, margin is about 3.3% of the position's notional value; at 100:1, 1%. Margin is not a fee or a cost - it is locked equity that returns when the position closes. It is the mechanism that makes leverage possible and the reason losses can exceed deposits when margin is not respected.
How It Works
- Margin = position notional / leverage
- Locked while the position is open
- Returns to equity on close
Trading Tips
Margin requirements grow with position size and fall with higher leverage
A broker can widen margin requirements in volatile conditions
Margin is the buffer that protects the broker, and the limit that protects you from yourself
Margin Example
Say you buy one standard lot of EUR/USD at 1.0850. That controls $108,500 of currency. At 30:1 leverage your broker locks about $3,617 as margin, under 3.3% of the position, and returns it when you close.
How Traders Use Margin
Use margin as your position-size governor. Keep most of it free so one bad trade never triggers a call, and read your broker margin-call and stop-out levels before you open anything, because the broker closes positions without asking once you cross them.
Related Terms
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