What is margin in forex?
Margin is the money provided to hold a position in forex. Investor.gov describes the security deposit or margin placed with a forex dealer.
The labels and calculation methods may differ by broker and platform.
What is required margin?
Required margin is the amount needed to hold a particular position. It varies with trade value, leverage, currency pair and account conditions.
Are account balance and required margin the same?
No. Account balance shows funds in the account, while required margin can be understood as funds reserved to maintain a position.
What are available funds?
Available funds indicate the capacity remaining for additional trades and changes in losses after accounting for required margin and other amounts. The label and calculation may differ by platform.
The relationship between leverage and margin
In leveraged trading, a relatively small amount of required margin may support a larger position. The size of profit or loss is not determined by the amount of required margin alone; it is affected by trade size and price movement. If available capacity is used to increase trade size, the resulting profit or loss can also vary by a larger amount.
What happens when unrealized losses increase?
When the market moves against a position and unrealized losses increase, effective available capacity falls. As a result, the margin level may decline and move closer to forced-closing conditions.
The relationship between margin and forced liquidation
Forced liquidation is a mechanism that closes positions under defined conditions such as margin level. The threshold and calculation method differ by broker and account conditions.
What beginners should check about margin
Beginners should not rely on account balance alone for reassurance. Check required margin, available funds, unrealized losses and forced-closing conditions together.
- Margin is the money used to hold a position.
- Required margin and account balance are not the same.
- Available capacity may fall as unrealized losses increase.
- Understanding margin is the basis for understanding forced liquidation.
Summary
Understanding margin makes the relationship between leverage and forced liquidation easier to see. Next, learn about forced closing by the broker.
Frequently asked questions
Is margin lost when you open a trade?
It is reserved as required margin and is different from a loss. Account funds still decrease if a loss occurs.
Are required margin and account balance the same?
No. Account balance is the money in the account; required margin is the money needed to maintain a position.
Does having more available margin mean you are safe?
It indicates more capacity, but sharp price movements or a large trade quantity can still increase losses.