Margin, Free Margin, Margin Level
Three numbers that all say the same thing: you're in over your head.
Let's be blunt
If you're making trading decisions based on your free margin, your margin level percentage, or how close you are to a stop-out — you have already failed. These numbers should never be a factor in a properly run operation. Ever.
Margin level, free margin, used margin — they're all the same thing viewed from a different angle. They tell you how much of your account is tied up as collateral for positions you currently hold. That's it. If this number is anywhere near critical, the problem isn't the number. The problem is you.
What people don't understand
You have $100 in your trading account. You buy 0.01 lot EUR/USD. That's a $1,000 position. Your broker is extending you $900 of exposure you don't have. You are in debt by $900 plus the cost of the trade the moment you click buy.
Your platform shows you this reality in three different flavours:
- Margin Used ($): How much collateral is locked. On $100 at 1:100 leverage, buying 0.01 lot locks ~$10.
- Free Margin ($): What's left. $100 − $10 = $90. This is what you have to absorb losses or open more positions.
- Margin Level (%): Equity ÷ Used Margin × 100. At $100 equity and $10 used margin, that's 1000%. Sounds great. It's meaningless.
These are not three different things. They are one thing — your current exposure relative to your account — expressed three ways. Traders who monitor "margin level" as if it's a separate risk metric are watching the same gauge on three different dials.
The $100 account reality
This question comes up almost exclusively from traders with small accounts. And the answer is always the same: if your account is so small that margin is a constraint, your account is too small for the position size you're trying to trade.
A $100 account at 1:100 leverage can technically open positions worth $10,000. The platform will let you. The margin numbers will look fine. And then a 1% move against you — which happens every single day on most pairs — wipes out the entire account. You didn't get stopped out because of margin. You got stopped out because you had no business being in that position with that account size.
When does margin actually matter?
Almost never, if you're doing it right. In practice:
- Prop firms: Drawdown limits will kill your account at -5% or -10%. A margin call typically triggers at 50-100% margin level. You'll be dead long before margin is relevant.
- Funded/normal accounts with proper sizing: If you're risking 0.5-2% per trade with sensible stop losses, your margin usage will be a fraction of your account. Free margin will never be a concern.
- Cash accounts at 1:1: Yes, margin matters here because you can only buy what you can afford. But then it's not really "margin" — it's just your buying power. Same as buying stocks with cash.