Free margin in forex (direct answer)
Free margin in forex is the portion of your account equity that is not already being used as margin to support your open positions. In practice, it reflects how much “available buffer” you still have if market prices move further.
A simple way to express the idea is:
- Free margin = Equity − Used margin
Where equity includes your account balance plus any unrealized profit or loss (P/L) from open trades, and used margin is the amount reserved by the broker to keep those trades open.
How free margin works (mechanics)
Free margin is not a fixed number. It typically changes as:
- Prices move: your open trades’ unrealized P/L changes.
- Unrealized P/L changes: since equity depends on unrealized P/L, equity rises when trades are in profit and falls when they are in loss.
- Used margin stays tied to the open positions: as long as the position size and contract requirements remain the same, used margin usually does not instantly change with every tick, but it can change if you open/close trades or if margin requirements differ across instruments.
Because free margin is derived from equity, it commonly acts as a “space remaining” measure: more unrealized loss reduces equity and therefore reduces free margin.
Example checks (and what to verify)
You can sanity-check the concept with a hypothetical snapshot:
- Suppose your equity is 1,000.
- Suppose your used margin for open trades is 400.
- Then your free margin is 600.
If the market moves against you and your unrealized P/L decreases equity to 850 while used margin remains 400, then free margin becomes 450.
Independent things you can verify on your own account (conceptually, without assuming any specific broker rules) include:
- whether the platform labels the same quantities as equity, used margin, and free margin;
- whether the platform’s unrealized P/L is included in equity for the free-margin calculation;
- how the platform behaves when free margin declines (for example, whether it shows alerts or performs account protection actions).
Relevant limitations and risks
Free margin is a useful indicator, but it has important limits:
- It is not a guarantee: even if you have free margin, your account can still be affected by rapid price changes, spreads, and broker risk controls.
- Broker rules matter: the exact threshold for actions like margin closeout (sometimes called margin call/closeout processes) depends on the broker’s margin methodology and the platform’s execution rules.
- Market moves can be fast: during volatile periods, unrealized P/L and therefore free margin can change quickly.
So the best way to use free margin in a factual way is to treat it as an account metric tied to equity and used margin, and to understand your broker’s platform behavior when free margin gets low—without assuming outcomes in advance.