Margin

In practice

To open one standard lot of EUR/USD ($100,000) at 1:100 leverage, your broker locks $1,000 of your balance as margin. That $1,000 is not a fee — it is returned when the trade closes — but it is unavailable for other trades and is the capital your floating loss eats into first.

Why it matters for traders

Margin is the gatekeeper between open positions and disaster. The more margin your trades consume, the smaller the price move needed to trigger a margin call. Traders who understand margin keep enough free buffer to survive normal noise; those who max it out get stopped out of good trades by ordinary wiggles.

Common pitfall

Traders confuse free margin with money available to spend and keep loading new positions until the buffer is thin. The pitfall is treating margin as room to trade rather than a buffer to survive. When several open positions are correlated, a single news move can consume all the free margin at once. Keep used margin well below half of equity so a normal adverse day never threatens the whole book, and never let the margin-level gauge tell your story for you.

Lessons that use this term

• Leverage and margin

  How borrowed size works, what margin locks up, and why over-leverage kills accounts.

• Margin call & stop out

  The two levels where the broker steps in — and why correct position sizing means you never meet either.

Related terms