Direct answer
Used margin is the amount of your account equity that a broker’s platform allocates (or “locks”) to support your currently open positions in forex. In practical terms, it reduces the margin you can still use to open new trades. The exact calculation and thresholds depend on the provider’s margin requirements and the instrument’s contract specifications.
Mechanism or definition
Think of a forex margin account as having two related amounts:
- Equity: your account value after considering profit/loss and other account adjustments.
- Margin: the portion of equity required to keep positions open.
Used margin refers to margin tied up by open positions. The complement is often called free (or available) margin, which is the part of equity not currently committed to used margin.
A simple model (with explicit assumptions) helps clarify the arithmetic:
- Assume you open a position with a size such that the required margin is $800.
- If this requirement is the broker’s stated margin for that position, then used margin increases by $800 at that moment.
- If your equity is $1,500, then free margin is $700 (before considering any other positions or fees).
If prices move and unrealized profit/loss changes your equity, free margin can shrink even if used margin stays roughly “reserved” for the open exposure. This is why used margin is closely linked to the risk of running out of free margin.
Evidence or example
Consider an account with two open positions.
- Assumption: the broker’s margin requirement for each position is fixed at the time the position is opened, and we ignore later changes in margin rules.
- You open Position A with required margin $500.
- You open Position B with required margin $700.
In this simplified view:
- Used margin = $500 + $700 = $1,200.
- If equity is $1,400, free margin is $200.
Now assume price movement creates an unrealized loss that reduces equity from $1,400 to $1,050. Under the same simplified assumptions:
- used margin remains $1,200 as a reserved figure for open positions.
- free margin becomes $-150 (or, in practice, it may trigger an enforced action based on the broker’s rules).
Material limitation: real platforms may change how they compute requirements or may apply additional checks (such as maintenance-style requirements, instrument-specific factors, or margin policy changes). Even when two traders use the same stated leverage, their used margin and available margin can differ because contract specifications and provider formulas can differ.
Limitations and risks
Used margin does not guarantee safety, and it does not predict outcomes. Common limitations and failure modes include:
- Calculation differences by provider: Margin requirements, definitions of equity, and how often requirements are recomputed can vary.
- Volatility and unrealized P/L: Even if used margin is “set aside,” equity can drop quickly due to adverse price moves, reducing free margin.
- Execution and costs: Spread, commissions, swap/financing charges, and order execution can affect equity and therefore free margin.
- Threshold actions: If free margin becomes insufficient relative to provider-defined requirements, the platform may impose restrictions or close positions.
Because rules can change and implementations differ, the most reliable verification is to check your broker/platform’s margin and risk documentation for the exact formulas and thresholds used to compute used and free margin.
Verification or next question
To independently verify used margin on your own platform, check three items in the provider’s documentation or account screens:
- The definition of equity, used margin, and free/available margin.
- The margin requirement formula (often tied to contract size, leverage, and instrument specifications).
- The action thresholds (for example, what happens when free margin is too low).
Next question to consider: What definitions and formulas does your specific platform use for used margin and its related trigger levels, and how frequently does it recompute them as prices and positions change?