Margin level is a simple but important number that tells you how much of your trading account is available to absorb losses and open new positions. For retail forex traders it acts as a snapshot of account health: when margin level is high you have more flexibility; when it falls toward critical broker-set thresholds you may face restrictions, margin calls or forced liquidations. Trading carries risk — losses can exceed deposits when using leverage — and this article explains margin level in plain language so you can manage that risk more confidently. This is general information, not personalised advice.
Margin and the key account figures
To understand margin level you first need the handful of account figures brokers show on trading platforms. Your account balance is the cash you deposited plus any closed trade profits or losses. Equity is your balance adjusted for any open trades: Equity = Balance + Floating P/L (unrealised profit or loss). Used margin is the portion of equity the broker sets aside to keep your open positions funded — think of it as collateral that’s locked while positions are active. Free margin (sometimes called available margin) is simply the equity that is not tied up: Free margin = Equity − Used margin.
These numbers move every second as prices change. If open positions are profitable equity rises and free margin increases; if positions lose money equity and free margin fall. Brokers normally calculate all of this automatically and show margin level in percent so you don’t need to do it by hand, but knowing the math helps you understand why the percentage changes.
What margin level measures and how to calculate it
Margin level measures the ratio of your equity to the used margin and is expressed as a percentage. It tells you how many times your used margin is covered by your equity. The formula is:
Margin level (%) = (Equity / Used margin) × 100
Put this into words: if equity is twice the amount of used margin the margin level is 200%. If equity equals used margin the margin level is 100% — at that point all available funds are already committed to current positions and you usually cannot open new trades.
For example, imagine you have $5,000 in the account and you open positions that require $1,000 in margin. If your open trades are currently at breakeven, equity is $5,000 and used margin is $1,000, so your margin level is (5,000 / 1,000) × 100 = 500%. If the market moves against you and your floating loss is $3,500, equity falls to $1,500 and the margin level becomes (1,500 / 1,000) × 100 = 150%. That drop shows how quickly margin level can fall as unrealised losses accumulate.
Margin calls and stop-out (forced close) levels
Brokers set rules that use margin level to protect both you and the broker from excessive losses. Two common thresholds are the margin call level and the stop-out (or liquidation) level. A margin call is an alert that your margin level has fallen to a predefined point and the broker asks you to add funds or reduce positions. If you do not act and the account keeps losing equity, the stop-out level is the point where the broker starts closing losing positions automatically to free up margin.
Exact percentages vary by broker. Some brokers use a margin call trigger around 100% and a stop-out between 20% and 50%, while others may use different levels or combine alerts with different notifications. As an illustrative scenario, if your broker’s margin call is 100% and stop-out is 50%, reaching 100% means you can’t open new trades and you may get an urgent request to top up. If you fall to 50% the broker may begin closing positions until the margin requirement is met.
Because brokers handle these rules differently, it’s important to check your broker’s specific margin call and stop-out percentages and how they choose which positions to close first.
How leverage and position size affect margin level
Leverage lets you control a large position with a smaller deposit. A higher leverage ratio reduces the margin required for each position but increases volatility in margin level because a small price move translates to a larger profit or loss relative to your equity. Margin and leverage are two sides of the same coin: margin is the deposit needed to hold a position, leverage is the multiple of exposure that deposit gives you.
For example, with 50:1 leverage you need 2% margin to hold a position. Controlling a $100,000 notional position would require $2,000 in margin. If you used most of your account equity to open such large positions, even a relatively small adverse move could push your equity down and reduce your margin level quickly, triggering margin-related actions by the broker.
Practical examples — step by step
Imagine an account opened with $3,000 balance. You open two positions requiring $1,200 used margin in total. Initially your equity is $3,000 so margin level = (3,000 / 1,200) × 100 ≈ 250%. If one trade goes against you and the floating loss is $900, your equity falls to $2,100 and margin level becomes (2,100 / 1,200) × 100 = 175%. If the loss grows to $1,800 equity is $1,200 and margin level becomes 100% — you are now at the point where you can’t open further trades and may receive a margin call. If losses continue and equity hits $600, margin level is 50% and you might reach the stop-out threshold depending on your broker.
Walking through numbers like this demonstrates how free margin shrinks before margin level hits critical marks. The two levers you control are position size (reduce it to lower used margin) and the amount of funds in the account (deposit to raise equity).
Managing your margin level: practical tips
Keeping a comfortable margin level is a matter of risk control, not luck. Use position sizing rules that limit the portion of your equity at risk on any single trade and avoid using the maximum leverage available just because you can. Use stop-loss orders to cap potential losses, and monitor exposure across correlated positions — several losing trades in related currency pairs can drain equity faster than unrelated positions. Maintain some free margin deliberately so you can withstand volatility or take new opportunities without being forced to close positions. Finally, be mindful that brokers may raise margin requirements during major economic announcements or low-liquidity periods, which will reduce your margin level even if your positions do not move.
Risks and caveats
Margin level is a helpful indicator but not a guarantee. Price gaps, slippage and extreme market moves can cause losses larger than expected and can lead to forced liquidations before you can act. Broker policies differ — some use account-level netting, others close specific positions first; some allow negative balances protection while others do not. Regulation and margin limits vary by region and by instrument; for example, regulators sometimes cap maximum leverage for retail clients. Because margin amplifies both gains and losses, always treat leveraged trading with caution. This article does not provide personalised advice; consider your own financial situation and, if necessary, seek independent guidance before trading.
Key Takeaways
- Margin level = (Equity / Used margin) × 100; it shows how safely your open positions are funded.
- Equity includes unrealised P/L; free margin = Equity − Used margin; platforms usually display these automatically.
- Falling margin level can trigger margin calls and stop-outs; broker thresholds vary so check their rules.
- Manage margin level with conservative position sizing, stop-losses, and by keeping spare free margin; trading carries risk and is not suitable for everyone.
References
- https://www.equiti.com/sc-en/news/trading-ideas/margin-levels-in-forex-trading-what-traders-should-know/
- https://www.forextime.com/education/videos/what-is-margin-level
- https://www.cmcmarkets.com/en-gb/learn-forex/what-is-margin-in-forex-trading
- https://www.babypips.com/learn/forex/what-is-margin-level
- https://www.tier1fx.com/faq/what-is-the-difference-between-margin-free-margin-and-margin-level/
- https://www.ig.com/en-ch/learn-to-trade/ig-academy/the-basics-of-forex-trading/margin-in-forex-trading