What it is
Margin is the part of your account that your broker sets aside as a deposit while a leveraged position is open. It is not a fee and it is not spent. It is locked while the trade is open and released when you close it. This calculator works out the position value (lots x contract size x price) and divides it by your leverage to give the margin required.
Why it matters
Margin decides how many positions you can hold at once. The money in your account that is not locked as margin is your free margin, and it is what absorbs losses on open trades. If losses use up too much of it, the broker issues a margin call and may close your positions automatically.
Knowing the margin before you click buy or sell shows you how much room you have left, and helps you avoid a surprise forced exit.
Why traders use it
Traders check it before opening a large position, before adding a second or third trade, and when comparing brokers or leverage settings. It is also handy when you move between instruments, because margin for gold or an index can be very different from margin for a currency pair.
How important is it?
It is important for staying in the game, but remember that margin is a limit, not a target. Being allowed to open a trade does not mean the trade is a sensible size. Margin tells you whether the broker will let you do it. Position size, based on your stop loss and risk, tells you whether you should.
Worked example
With the defaults you trade 1 standard lot at a price of 1.1000, with a contract size of 100,000 and leverage of 1:100. The position value is 110,000 and the margin required is 1,100.
If the broker offers 1:500 and you pick that, the margin falls to 220. But one pip is still worth $10, so your risk on the trade has not changed. Higher leverage lowers the margin, it does not lower the risk. Only a smaller lot size does that.
Common mistakes
- Treating higher leverage as extra safety or extra profit. It only lowers the deposit needed, and makes it easier to take a position that is too big.
- Using all your free margin. A small move against you can then lead to a margin call.
- Forgetting that margin for several open positions adds up.
- Using the wrong contract size. Gold, indices and crypto often have different contract sizes from 100,000, so check your broker.
- Ignoring your broker's margin call and stop-out levels, which differ between brokers.
Frequently asked questions
What is the difference between margin and leverage?
Leverage is the ratio between the position value and the money you put up. Margin is that money. At 1:100, a position worth 110,000 needs 1,100 of margin.
How much margin is needed for 0.01 lot of Gold (XAUUSD)?
For Gold, 1 standard lot is typically 100 oz, so 0.01 lot is 1 oz. If Gold is at $2,600 and your leverage is 1:100, the margin required for 0.01 lot is $26.00 (enter 0.01 lots, price 2600, leverage 100, and contract size 100).
What is a margin call?
It is a warning from the broker that your equity has fallen too close to the margin you have in use. If it keeps falling, the broker can close your positions. The exact levels depend on the broker.
Is margin a cost I pay?
No. It is a deposit held while the trade is open. The costs of trading are things like the spread, commission and overnight swap.
Related trading guides
What is Margin and a Margin Call?
Understand how margin works in trading, the risks of leverage, and how to avoid the dreaded margin call.
What Is Leverage in Forex and How Risky Is It?
Learn how forex leverage works, why it magnifies both gains and losses, and how to keep your effective leverage under control.
How to Calculate Position Size, Step by Step
A simple four-step method to work out your lot size from your account balance, risk percentage and stop loss, with worked examples.
This page is for education only and is not financial advice. See our disclaimer.