Margin Excess

Margin excess is the amount of equity in an account that exceeds the required maintenance margin. It is the "cushion" that protects a trader from being liquidated during temporary price moves against their position.

The more margin excess a trader has, the more volatility their position can withstand. Maintaining a sufficient margin excess is a key strategy for avoiding the stress of a margin call.

When a trader opens new positions, the margin excess decreases. If it drops to zero, the account is at the threshold of a liquidation.

It is essential for traders to keep a healthy margin excess to allow for market fluctuations. Traders often calculate this value before entering a trade to see how much room they have for the market to move against them.

It is the buffer of safety that allows for disciplined trading. Monitoring margin excess is a daily task that helps ensure that a temporary loss does not turn into a forced liquidation.