Margin and free margin are two numbers that control your forex risk. Margin is money reserved to open positions; free margin is what remains to open new ones. Chasing them to zero means a margin call. Here is the explanation.
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What Margin Is
Margin is the deposit your broker holds as collateral for open positions — calculated from position size and leverage. It is not a cost; it is locked equity.
What Free Margin Is
Free margin = equity − margin used. It is available to open new trades or absorb floating losses.
Why It Matters
- Floating losses eat free margin first.
- When free margin hits zero, the broker can margin-call/close positions.
- Keeping free margin comfortably positive avoids forced closes.
How to Protect Yourself
- Use modest leverage.
- Keep positions small relative to balance.
- Monitor margin level, not just P&L.
FAQ
Does the broker charge margin?
No — it is collateral reserved, returned when the position closes.
What causes a margin call?
Floating losses reducing free margin to zero while positions run against you.
Related: Position Sizing and Advanced Trading.