// TRADING TERMINOLOGY
What is Margin?
Margin is the portion of your account balance that the broker "locks away" as collateral to keep your leveraged position open.
In-Depth Explanation
Margin is not a transaction fee. It is a security deposit.
If you want to open a £100,000 position using 30:1 leverage, you must have at least £3,333 in your account as Margin. The broker freezes this amount. The remaining cash in your account is your "Free Margin."
If a trade goes against you and your floating losses eat through your Free Margin, your broker will issue a "Margin Call" (or simply auto-liquidate the position). This is the broker stepping in to protect themselves from you going into negative balance. You must always maintain sufficient Free Margin to allow your trades room to breathe.
PETE'S TIP
"Never risk your entire account on a single trade. A healthy risk management profile ensures that your required margin rarely exceeds 5-10% of your total account equity."
Practical Example
"Your account balance is £5,000. You open a trade that requires £1,000 in margin. You have £4,000 in Free Margin to absorb any temporary floating losses."
Related Terms
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