Trading Mechanics
Module 9 — Margin
Margin is the portion of your balance the broker sets aside to hold a position open. At 1:100 leverage, a standard lot worth $100,000 requires about $1,000 of margin. That money is not a fee — it is collateral, returned when you close.
- Balance — your account before open positions are counted
- Equity — balance plus or minus the profit/loss of open trades
- Used margin — collateral currently held
- Free margin — equity minus used margin, the room you have left
- Margin level — equity divided by used margin, as a percentage
When the margin level falls to the broker's stop-out threshold, positions are closed automatically. A margin call is not a strategy problem — it is a sizing problem that arrived late.
Key concepts
- Margin is collateral
- Free margin is remaining capacity
- Low margin level can force closure
Practical example
Opening several large positions can consume free margin even when each idea appears reasonable alone.
Common mistake
Treating available margin as money that should be used.
Knowledge check
Check your understanding
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