Free Margin

Free margin is the amount of funds available in a margin account to open new positions or to absorb potential losses from existing ones. It is calculated by taking the total equity and subtracting the margin already used for open positions.

This is the capital that the trader can actually deploy. A positive free margin indicates that the trader has the capacity to take on more trades or weather losses.

If the free margin becomes negative, it usually means the account is under-collateralized and a margin call is imminent. For a trader, keeping a positive free margin is a must for both planning new entries and protecting current ones.

It is the liquidity within the margin system. Understanding how your trades impact your free margin is a vital skill.

It prevents over-trading and helps maintain a balanced risk profile. Many platforms show this in real-time, making it easy to track.

Keeping free margin in mind ensures that you are never caught off-guard by a sudden market move.