GLOSSARY
Free margin
The part of your equity that is neither locked as collateral nor already lost.
Updated 2026-09-05 · Educational content · No broker owns this site
Quick answer. Free margin is the part of your equity that is not locked as collateral for open positions. It equals equity minus used margin, and it serves two jobs at once: the money available to open new trades, and the buffer that absorbs losses on the trades you already hold.
Once a position is open your account splits in two. Part of your equity is held as margin against that position; the rest is free. Platforms show it as free margin, available margin or usable margin — the same figure.
How is free margin calculated?
Continuing the same account: $2,000 deposited, 0.30 lots of EUR/USD open, $1,100 of margin locked at the 30:1 cap, and the trade 40 pips underwater at $3.00 a pip.
- Equity: $2,000 − $120 = $1,880
- Used margin: $1,100 (fixed at the moment the trade opened)
- Free margin: $1,880 − $1,100 = $780
Notice which side moves. Used margin is frozen at $1,100 for the life of the trade. Every dollar the position loses comes out of free margin, one for one.
What is free margin actually for?
Beginners read it as buying power, and it is — but that is the less important half. Free margin is the distance between where you are and the point where the broker takes the decision out of your hands. When it reaches zero, equity equals used margin, the margin level is 100%, and the account is one bad hour from a forced close-out.
What do beginners get wrong about free margin?
The common mistake is spending it. Seeing $780 free and opening a second position of similar size leaves almost nothing to absorb losses on either trade — and correlated pairs tend to lose together. Free margin is not idle capital waiting to be deployed; it is the reason a normal losing streak does not end the account.
Related terms
- Leverage · Margin · Equity
- Free margin · Margin level
- Margin call · Stop-out level
- Lot · Pip — the two numbers that decide how fast the margin picture moves
Frequently asked questions
What happens when free margin hits zero?
Equity has fallen to exactly the margin your open trades require, a margin level of 100%. Most brokers will refuse new positions at that point and start warning you. Further losses push the account toward the stop-out.
Does free margin change when the market moves?
Yes, tick by tick. Used margin is fixed when the trade opens, so every change in unrealised profit or loss lands entirely on free margin.
Can I withdraw my free margin?
Usually part of it, subject to your broker's own rules. Withdrawing it also removes the buffer protecting your open trades, so the positions become far more sensitive to an ordinary move.
Sources
- ESMA — Additional information on the agreed product intervention measures (27 March 2018)
- FCA PS19/18 — Restricting contract for difference products sold to retail clients (2019)
- FirstPip knowledge base — concepts/leverage-and-margin (sources S007, S010, S011, S013)