GLOSSARY
Margin
The slice of your money the broker holds as collateral — set aside, not spent.
Updated 2026-09-05 · Educational content · No broker owns this site
Quick answer. Margin is the money a broker sets aside from your account as collateral while a leveraged position is open. It is not a fee: it returns to your balance when the trade closes. Required margin equals the position's notional value divided by the leverage ratio.
When you open a leveraged trade the broker does not lend you cash. It ring-fences part of your account so there is something to absorb the loss if the trade goes wrong. That ring-fenced part is margin, and platforms usually label it used margin or margin in use.
Two things follow from that. The money is still yours — it is returned in full when the position closes, win or lose. And it is unavailable while the trade is open, which is why a second trade can be refused even though the balance looks healthy.
How is required margin calculated?
Take the notional value of the position and divide by the leverage ratio. Notional value is simply the units you are trading multiplied by the price.
- 0.30 lots = 30,000 units of the base currency
- 30,000 × 1.1000 = $33,000 notional value
- $33,000 ÷ 30 = $1,100 required margin
Regulators write the same rule as a percentage rather than a ratio. ESMA requires 3.33% initial margin on major currency pairs and 5% on the rest; the NFA requires a 2% security deposit on its list of major currencies and 5% on others. A ratio and a percentage are interchangeable: 3.33% is 30:1, 2% is 50:1, 5% is 20:1.
What do beginners get wrong about margin?
The common error is reading margin as a cost, then choosing the broker with the "cheapest" margin. Margin is not priced — it is a consequence of the leverage cap you trade under. A lower margin requirement means higher leverage, which means the same deposit carries more exposure. It is looser, not cheaper.
The second error is filling the account with margin. Locking $1,900 of a $2,000 account leaves $100 of free margin to absorb the loss, so a small move triggers a margin call. Decide your risk first, then size the position — the order matters.
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
Is margin a fee?
No. It is collateral held while the position is open and credited back to your balance when it closes. The costs of a trade are the spread, any commission, and the overnight swap — margin is separate from all three.
What is the difference between margin and leverage?
They are the same fact stated two ways. Leverage is a ratio (30:1); margin is the matching percentage of notional value you must post (3.33%). Multiply them and you get 100%.
Why can I not open a second trade when my balance looks fine?
Because the platform checks free margin, not balance. Once the first position locks its margin, only what is left over can support a new one — and unrealised losses reduce that figure in real time.
Sources
- ESMA — Additional information on the agreed product intervention measures (27 March 2018)
- NFA Financial Requirements Section 12 — Security deposits for forex transactions (amended 18 March 2026)
- FirstPip knowledge base — concepts/leverage-and-margin (sources S007, S010, S011, S013)