Free Margin

Free margin is the amount of available funds in a trading account that can be used to open new positions. It is calculated by subtracting the margin currently being used for open trades from the account equity. The account equity includes the balance plus or minus any unrealized profits or losses. In simple terms, free margin shows how much of your capital is still available for trading. This is considered after accounting for your existing trades.

For example, if your account equity is $5,000 and $1,000 is being used as margin for open positions, your free margin is $4,000. Maintaining sufficient free margin is important. It helps you avoid margin calls—situations where the broker asks you to deposit more funds or close trades to maintain required margin levels. Traders often monitor their free margin closely. This helps them manage risk and ensure they have enough flexibility to react to market changes.

Browse through other terms in our Trader’s Dictionary.