Direct answer: what does margin mean in forex?
In forex, margin is the required amount of funds that your broker holds to support your leveraged position. You do not pay the full trade value; instead, margin acts as a security deposit that helps ensure the account can cover potential losses.
How margin works in forex
Margin is tied to leverage. Leverage lets you control a larger position size than the cash you deposit. Because your position can move against you, the broker requires margin so it can manage credit risk.
In practice, you can think of three related account concepts:
- Margin required: the amount set aside for your open positions.
- Equity: the value of your account including the effect of market moves on your positions.
- Free margin (usable margin): equity minus margin currently locked for open trades.
When the market moves, it changes your account’s equity. If equity falls far enough, your free margin can shrink. That is where margin pressure becomes relevant: the account may no longer meet the broker’s ongoing margin requirements.
Margin rules can vary by broker and by account type, but the core idea stays the same: margin is not profit or loss by itself—it is the funds framework that determines whether you can keep leveraged positions open.
Example checks (conceptual, not a recommendation)
- If you open a leveraged trade, the broker typically locks part of your balance as margin required.
- If prices move against your position, your equity decreases, which can reduce free margin.
- If free margin drops below required thresholds, the broker may take action such as requesting additional funds (margin call) or closing positions (stop-out).
A useful independent verification step is to read your broker’s margin requirements and definitions for: margin required, equity, free margin, margin call, and stop-out level. Those terms often differ in naming and calculation details.
Relevant limitations and risks
- Margin requirements are rule-based: they depend on broker settings and the instrument’s contract specifications, so you need the exact published definitions for your account.
- Leverage increases sensitivity: with more leverage, smaller market moves can reduce equity faster relative to the margin locked.
- No future outcome is implied: margin explains the mechanics of holding positions, but it does not predict whether trades will be profitable.
To learn more about how margin pressure is handled, see the concept overview in the avoiding margin pressure page: “avoiding margin pressure”.
How margin differs from related terms
Margin is related to, but not the same as, other forex concepts like leverage and equity. Leverage describes the position size versus deposited funds. Equity reflects your account value as prices move. Margin is the broker-required funds portion that supports your position and can become the basis for margin pressure decisions.