Margin is the mechanism that makes leveraged forex trading possible. It allows you to control $100,000 worth of currency with just $1,000 or less in your account. But this power comes with responsibility. If you do not understand margin, you will eventually face a margin call, where your broker forcibly closes your positions at a loss. A margin calculator helps you know exactly how much margin each trade requires, what your margin level is, and how far the market can move before you face liquidation.
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Margin Basics Explained
Think of margin as a security deposit. When you open a leveraged forex trade, your broker does not lend you money in the traditional sense. Instead, they require you to put up a fraction of the trade's full value as collateral. This collateral is called the required margin.
For example, if you want to open a 1 standard lot position on EUR/USD (worth approximately $108,500 at current rates), and your leverage is 1:100, your broker requires 1% of the position value as margin. That is approximately $1,085. The remaining $107,415 is the leverage provided by your broker.
The margin is not deducted from your account. It is held, or locked, while the trade is open. Once you close the trade, the margin is released back into your available balance (along with any profit or minus any loss).
The Margin Calculation Formula
Required Margin = (Trade Size / Leverage) x Exchange Rate
For pairs where USD is the base currency (USD/JPY, USD/CHF):
Required Margin = Trade Size / Leverage
For pairs where USD is the quote currency (EUR/USD, GBP/USD):
Required Margin = (Trade Size / Leverage) x Base Currency Rate in USD
Worked Example
Pair: EUR/USD at 1.0850. Trade size: 0.5 lots (50,000 units). Leverage: 1:200.
Required Margin = (50,000 / 200) x 1.0850 = 250 x 1.0850 = $271.25
Your broker locks $271.25 of your equity. The remaining equity is your free margin, available for opening additional trades or absorbing unrealized losses.
You just calculated the margin. Now you know exactly how much capital each trade locks up. Exness shows real-time margin level on every open position so you never get surprised by a margin call.
See Live Margin LevelsTypes of Margin You Need to Know
Required Margin (Used Margin): The total amount of margin locked across all your open positions. If you have three open trades requiring $200, $150, and $100 respectively, your used margin is $450.
Free Margin: Your equity minus used margin. This is the amount available for opening new positions and absorbing floating losses. Free Margin = Equity - Used Margin.
Margin Level: Expressed as a percentage, this shows the health of your account. Margin Level = (Equity / Used Margin) x 100%. A margin level of 1,000% means your equity is 10 times your required margin. A margin level of 100% means your equity exactly equals your required margin, with zero room for losses.
Equity: Your account balance plus or minus any unrealized profit or loss from open positions. Equity = Balance + Floating P/L.
Margin Requirements by Leverage Level
| Leverage | Margin % | Margin for 1 Lot EUR/USD | Margin for 0.01 Lot |
|---|---|---|---|
| 1:50 | 2% | ~$2,170 | ~$21.70 |
| 1:100 | 1% | ~$1,085 | ~$10.85 |
| 1:200 | 0.5% | ~$542.50 | ~$5.43 |
| 1:500 | 0.2% | ~$217 | ~$2.17 |
| 1:1000 | 0.1% | ~$108.50 | ~$1.09 |
Higher leverage means lower margin requirements but does not change your risk per pip. A $100 loss on a trade is a $100 loss regardless of whether you used 1:100 or 1:1000 leverage. The only difference is how much of your account was locked as margin.
Understanding Margin Calls and Stop Outs
A margin call is a warning from your broker that your margin level has dropped to a dangerous level. A stop out is the forced closure of your positions when the margin level drops further. Each broker has different thresholds:
Margin Call Level: The margin level percentage at which the broker sends a warning. At XM, this is 50%. At Exness, policies vary by account type.
Stop Out Level: The margin level at which the broker starts automatically closing your positions, beginning with the largest losing position. At XM, this is 20%. At many EU-regulated brokers, it is 50%.
Example Margin Call Scenario
Account balance: $1,000. You open 0.5 lots of EUR/USD at 1:100 leverage. Required margin: $542.50. Free margin: $457.50. Margin level: ($1,000 / $542.50) x 100 = 184%.
The trade moves against you by 80 pips. Loss: 80 x $5 = $400. Equity drops to $600. Margin level: ($600 / $542.50) x 100 = 110%. Getting dangerous.
The trade moves further, down 90 pips total. Loss: $450. Equity: $550. Margin level: 101%. At XM, the margin call triggers at 50%, so you still have room. But at 100 pips against ($500 loss), equity is $500, margin level is 92%. At many brokers, you would already be in trouble.
Calculating Margin Level
Margin Level = (Equity / Used Margin) x 100%
Check your margin level in MetaTrader's terminal window. It updates in real-time. Here is a quick reference:
Above 1,000%: Very safe. Your equity is at least 10x your required margin.
500-1,000%: Safe. Adequate buffer for normal market moves.
200-500%: Caution. A significant adverse move could bring you close to margin call territory.
100-200%: Danger zone. Very little room for the market to move against you.
Below 100%: Critical. Margin call territory. Position closures may be imminent.
How to Avoid Margin Calls
Use proper position sizing. Never risk more than 2% of your account per trade. Use a lot size calculator to determine the correct position size based on your stop-loss, not based on your available margin.
Always use stop-losses. A stop-loss limits your maximum loss on any trade, preventing equity from draining to the point of a margin call. Trades without stop-losses are the primary cause of margin calls.
Monitor total exposure. If you have three open trades, calculate your total risk across all positions. Your aggregate risk should not exceed 5-6% of your account.
Keep leverage reasonable. While high leverage (1:500 or 1:1000) allows very low margin requirements, it also means you can open dangerously large positions. Use the flexibility of high leverage but the discipline of conservative position sizing.
Add funds proactively. If a trade is in drawdown and approaching your risk threshold, consider depositing additional funds to increase your margin level rather than waiting for a stop out.
Broker Margin Policies Compared
| Broker | Max Leverage | Margin Call | Stop Out | Negative Balance |
|---|---|---|---|---|
| XM | 1:1000 | 50% | 20% | Yes |
| Exness | Unlimited | 60% | 0% | Yes |
| AvaTrade | 1:400 | 50% | 10% | Yes |
XM's margin call triggers at 50% and stop out at 20%. That gives you more breathing room than most brokers. If margin management is your priority, the numbers speak for themselves.
Check XM Margin PolicyFrequently Asked Questions
What is margin in forex trading?
Margin is the amount of money your broker holds as collateral to open and maintain a leveraged position. It is not a fee or cost — it is a portion of your account equity that is locked while the trade is open. For example, with 1:100 leverage, you need $1,000 margin to control a $100,000 (1 standard lot) position.
What is a margin call?
A margin call occurs when your account equity drops below the required margin level, typically 50-100% depending on the broker. At this point, the broker may close some or all of your positions to prevent further losses. XM issues margin calls at 50% margin level and stops out at 20%.
How do I calculate required margin?
Required Margin = (Trade Size in Units / Leverage) x Exchange Rate. For 1 standard lot of EUR/USD at 1.0850 with 1:100 leverage: (100,000 / 100) x 1.0850 = $1,085. Your broker locks $1,085 of your account as margin for this position.
What margin level is safe in forex?
A margin level above 500% is considered safe. Above 1,000% is very comfortable. Below 200% is risky, and below 100% means you are approaching a margin call. Professional traders rarely let their margin level drop below 300% by keeping position sizes reasonable relative to their account equity.