Free margin refers to the amount of money in your account that is available to open new positions or maintain current ones. It’s the difference between your equity and the margin used by your open trades.
Free margin is essential for trading because it determines whether you have enough capital to open new positions. Insufficient free margin can lead to a margin call, where your broker may close positions automatically to cover losses.
If your equity is $1,200 and you’ve used $500 in margin for existing trades, your free margin is $700. This means you can use up to $700 to open new positions without triggering a margin call.
Test your knowledge of free margin in forex trading with the following questions:
