Financial Market (Part 7)

Used Margin Explained

Margin, also known as used margin, is the amount of your funds that gets locked when you open a trade and remains reserved until the position is closed.
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The exact amount of margin depends on the instrument being traded, the size of the position, and the level of leverage used.
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Use the following formulas to calculate it:
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Trade size in units ÷ Leverage = Margin in base currency.
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Trade size in units ÷ Leverage) × Exchange rate = Margin in quote currency.

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The ‘Margin’ value shown in your trading account reflects the total used margin across all open positions.

How leverage affects margin

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Now let's see how leverage affects margin. The amount of margin required is directly influenced by the level of leverage:
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• Higher leverage → Less margin needed
  
  
• Lower leverage → More margin required
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For example, to buy one standard lot (€100,000) of EUR/USD with leverage 1:1, your account must hold the full €100,000.

Now, let’s calculate using 1:30 leverage:
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100,000 ÷ 30 = €3,333.33
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If your account is in USD and the EUR/USD rate is 1.11413:
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100,000 ÷ 30 × 1.11413 = $3,713.77
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Review the ‘Lots and Leverage’ lesson to better understand the risks and mechanics of using leverage.

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Leverage levels

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Different assets come with fixed maximum leverage levels.
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To find the required margin, use this formula:
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Trade size in units ÷ Leverage × Market Price = Margin (in base currency) 
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Example: Calculating margin for 1 lot of Gold (100 oz), with a price of $1511.73 and 1:20 leverage:
100 ÷ 20 × 1511.73 = $7,558.65

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Free Margin

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Here are a few basic terms, which are crucial to know.
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‘Free Margin’ is the amount available in your account to open new trades or to withdraw.
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It’s the amount of your funds not tied up in securing open positions.
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Formula:
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Equity − Used Margin = Free Margin

Equity

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‘Equity’ is the current value of your trading account, which includes your account balance plus or minus any unrealised profit or loss from open positions.
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When you close a trade, the unrealised PnL is added to or subtracted from your balance.
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If you have open positions, your equity will fluctuate while your balance stays unchanged. When no trades are open, equity and balance will match.

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Margin Level

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‘Margin Level’ shows the ratio of your equity compared to the used margin and is expressed as a percentage.
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Formula:
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Equity ÷ Used Margin × 100
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If your margin level drops to 100% or below, all your equity is being used to support open trades. At this point, no new positions can be opened, and your ‘free margin’ becomes negative.

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Stop Out

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A ‘Stop Out’ is the automatic closure of open positions when your equity falls below a certain level. This level is set by the platform (check the platform comparison table for details).
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Let’s look at an example: With a Stop Out level of 50% and used margin of €1000, positions will begin closing if your equity falls to €500.
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Stop Outs are designed to protect your account balance from going negative. However, in volatile markets or during price gaps, losses beyond your deposit are still possible.
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Atmexx provides negative balance protection, ensuring you can't lose more than you've deposited. Please read our Order Execution Policy for more information.

Quick recap

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• Margin - funds needed to open a trade.
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• Free Margin - unused funds available for new trades.
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• Equity - your account balance plus unrealised PnL.
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• Margin Level - equity expressed as a % of used margin.
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Stop Out - refers to the automatic closing of trades when your account margin level hits a certain point, helping to prevent additional financial loss.