Margin level is your equity divided by used margin, times 100. The higher it is, the more room your account has. City Traders Imperium warns against holding a margin level of 150 percent or below on any single position. Holding several positions across different timeframes and symbols to spread risk is permitted.
When your margin level falls below your broker threshold you receive a margin call, a warning that your equity is close to the margin you have committed. If it keeps falling, positions are closed automatically to stop the balance going negative. Thresholds vary, so check your own account terms.
| Leverage | Margin Required | Of Balance Used | Free Margin Left |
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Margin is not a fee, it is a portion of your balance set aside while the trade is open. You get it back when you close. What it does is limit how many positions you can hold at once, which is why running out of free margin stops you trading even when nothing has gone wrong.
Higher leverage means less margin tied up for the same position, so it frees up balance. It does not reduce what you stand to lose. Your loss depends on your stop distance and position size, and those do not change when the leverage does.
Effective leverage is your position value divided by your balance, and it is the number that actually matters. An account offering 1:500 does not mean you should use it. Most professionals keep effective leverage in single digits regardless of what the broker allows.
Take the position value in your account currency and divide it by your leverage. One standard lot of EUR/USD is 100,000 euros, which at an EUR/USD rate of 1.08 is a position value of 108,000 dollars. At 1:100 leverage that requires 1,080 dollars of margin. At 1:500 the same trade needs only 216 dollars.
Because the position is measured in the first currency of the pair. A lot of GBP/JPY is 100,000 pounds, so the margin depends on the value of the pound in dollars, not the yen. This is the opposite of pip value, which depends on the second currency, and it is a common source of confusion.
Free margin is the part of your balance still available to open new positions or absorb losses on open ones. It is your balance minus the margin already committed, adjusted by any floating profit or loss. When free margin runs low you cannot open new trades even if your account is profitable.
A margin call is a warning that your equity has fallen close to the margin you have committed, and a stop out is when the broker closes positions automatically to prevent a negative balance. The trigger levels vary by broker, commonly around 100 percent for the call and 50 percent for the stop out, so check your own account terms.
Not by itself. Leverage only changes how much margin is set aside. What makes a position risky is its size relative to your account and how far away your stop sits. The danger is indirect, because high leverage makes it possible to open a position far larger than your account can sensibly support.
There is no fixed rule, but many traders keep total margin under 10 to 20 percent of the balance so there is plenty left to absorb drawdown and open other positions. If a single trade needs most of your balance as margin, the position is almost certainly too large for the account.
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