What is margin, margin level and free margin?

What is Margin?

Margin is the required amount in the base currency of the trading account needed to open or maintain a position.

1. Calculating Forex Margin

When trading Forex, the Required/Used Margin for a specific position = Number of Lots * Contract size / Leverage.

Here the result is originally calculated in the first currency of the traded pair, and then converted into the base currency of your trading account, which will be numerically displayed on your MT4, or any other trading platform.

2. Calculating Gold and Silver Margin

The margin requirement for gold land silver is calculated like this: Lots * Contract Size * Market Price / Leverage.

The result will be in USD, which will be converted into the base currency of your trading account (in case it is other than USD).

3. Calculating CFD Margin

For CFDs, the required margin is Lots * Contract Size * Opening Price * Margin Percentage.

The result will be in USD, which will be converted into the base currency of your trading account (in case it is other than USD).

Use XM’s Online Calculator

What is Margin Level?

Margin level is calculated with the formula Equity/Margin * 100%.

What is Free Margin?

Free margin is your equity minus margin.

It means the available funds that you use for opening new positions, or for maintaining existing positions.

How can I calculate the margin?

Margin calculation formula for Forex instruments is the following:

(Lots * contract size / leverage)

where the result is at always in the primary currency of the symbol.

For STANDARD accounts all Forex instruments have a contract size of 100,000 units.

For MICRO accounts all Forex instruments have a contract size of 1,000 units.

For instance, if the base currency for your trading account is USD, your leverage is 1:500 and you are trading 1 lot EURUSD, the margin will be calculated like this:

(1 * 100 000/500) = 200 Euros

Euro is the primary currency of the symbol EURUSD, and because your account is USD, the system automatically converts the 200 EUROS to USD at the actual rate.

You can also use XM’s online calculator to see how much margin is required for each trade you like to place on XM MT4 and MT5.

Use XM’s Online Calculator