Direct answer: the free margin formula
In forex, free margin is commonly calculated as:
Free Margin = Account Equity − Used Margin
This definition treats account equity as the account value including floating profit or loss, and used margin as the portion of equity set aside to support open positions.
How the calculation works (definitions and inputs)
1) Account equity
A simple way to think about account equity is:
Account Equity = Balance + Floating Profit/Loss
- Balance is the closed-result value of the account.
- Floating Profit/Loss is the unrealized gain or loss from open positions based on current market prices.
Because floating results depend on live prices, equity (and therefore free margin) can change continuously.
2) Used margin
Used margin is the amount required by margin rules to keep open positions active. It is determined by factors such as:
- the position size (often expressed in units or lots),
- the contract value of the instrument,
- the broker’s margin/leverage rules (which can vary by broker and account type).
Since margin rules are not universal, the exact “used margin” number is normally taken from the broker/platform’s margin calculation for the account.
3) Putting them together
Once you have both values, you compute:
Free Margin = (Balance + Floating P/L) − Used Margin
Where you typically see it
Most trading platforms display free margin directly. If you calculate it manually, use the platform’s displayed equity and used margin values to stay aligned with that broker’s margin methodology.
Example checks you can do yourself
Because you may not have the broker’s exact internal margin formula, focus on verifiable consistency checks.
Check 1: If there are no open positions
If you have no open positions, then:
- used margin is typically zero, and
- floating P/L is typically zero.
In that case, free margin should align closely with balance/equity.
Check 2: Price moves while position size is unchanged
If a position moves and creates floating profit, equity rises, so free margin increases (all else equal). If it creates floating loss, free margin decreases.
Check 3: Leverage/margin rules differ across accounts
Two accounts with the same open position size can show different used margin and therefore different free margin if their margin rules differ. This is why the broker/platform’s displayed used margin is important for accuracy.
Relevant limitations and risks
- Margin rules vary: Used margin depends on the broker’s margin/leverage settings and instrument specifications, so your manual method must match those rules.
- Values change with prices: Floating profit/loss changes as prices move, which can cause free margin to change quickly.
- No guaranteed interpretation: Free margin being “high” does not guarantee safety, because margin can tighten if prices move against open positions or if margin calculations update.
- Verification matters: For an auditable result, compare your computed free margin to the trading platform’s displayed free margin using the same equity and used margin inputs.
If you share the exact platform fields you see (balance, equity, used margin, and whether floating P/L is included in equity), you can map them directly into the formula above without assuming missing internal calculations.