Short answer: what is free margin in forex? It is the money in your account that is not locked up as collateral for open trades. The platform works it out as equity minus used margin, where equity is your balance plus or minus the floating result on open positions. Free margin is what you can still commit to a new position, and it is the cushion that keeps you away from a margin call. When it reaches zero, you cannot open anything new, and the account is one adverse move from a stop-out.
The five numbers your platform shows
Most platforms show a short row at the bottom of the screen: balance, equity, used margin, free margin, and margin level. Two simple formulas connect them.
| Figure | How it is worked out | What it tells you |
|---|---|---|
| Balance | Deposits minus withdrawals plus closed results | Cash, ignoring open trades |
| Equity | Balance plus floating profit or loss | The real value of the account right now |
| Used margin | Collateral held for every open position, added up | What is locked |
| Free margin | Equity minus used margin | What is still available |
| Margin level | Equity divided by used margin, times 100 | Distance from a margin call, as a percentage |
Balance is the most quoted number and the least useful, because it is a stale reading while a trade is open. A tidy way to remember the rest: equity is the whole account, used margin is the locked part, and free margin is what remains.
How free margin is calculated, step by step
Take a 10,000 account, leverage of 1:100, and a long trade of one standard lot on EUR/USD at 1.1000. One lot is 100,000 units, so the notional value is 110,000. At 1:100, the broker holds 1 percent of that as collateral.
- Used margin: 110,000 divided by 100, which is 1,100.
- Free margin at entry: 10,000 minus 1,100, which is 8,900.
- Margin level at entry: 10,000 divided by 1,100, roughly 909 percent.
Now the price drops 50 pips against you. A 50-pip move on one lot is 500, so equity falls to 9,500. Used margin does not change, because the position size is the same. Free margin becomes 8,400 and margin level slips to roughly 864 percent.
Notice that free margin lost the full 500 even though only 1,100 was locked. Losses come out of the free portion first, which is why it warns first. Our guide to how leverage works in trading explains why the same lot needs more collateral at lower leverage settings.
Why free margin matters more than balance
Free margin does two jobs. It sets a hard ceiling on new trades: if a new position needs 2,000 of margin and you have 1,500 free, the order is rejected. It is also your buffer against market fluctuations, and a margin call is nothing more than that buffer running dry. It shapes trading strategies too: a trader with room can wait for a second setup, while a trader with none can only watch.
Margin level is the number the broker acts on, with a warning at one percentage and a stop-out at a lower one. Our explainer on what a margin call means in practice covers what happens when the threshold is crossed. For a general description of how margin accounts work, see the FINRA investor page on margin accounts.
Common mistakes and misconceptions about free margin
Free margin is a plain number, but the way people read it is often lopsided. Three misreadings come up most among traders who use margin casually.
- "Free margin is spare cash I can risk." It is the buffer between your equity and a forced exit. Spending all of it leaves nothing to absorb the next move.
- "High leverage gives me more free margin." It lowers used margin per lot, but it also lets you open positions so large that the same 50 pips wipes the free portion out. The number looks generous and behaves stingy.
- "Used margin grows when the trade loses." It does not. Used margin is fixed by lot size and leverage. Losses hit equity and free margin, not the locked amount.
The common thread is ambiguity between "available" and "safe". The first is a mechanical limit. The second is a decision about how much of it you refuse to use.
Two scenarios where free margin quietly runs out
Both use the same 10,000 account and the same margin calculation as above.
One oversized trade. The trader opens five lots of EUR/USD instead of one. Used margin is 5,500 and free margin is 4,500. A 50-pip adverse move costs 2,500, so free margin is 2,000. Another 40 pips and it is zero. Ninety pips is an ordinary session on EUR/USD, so this account was precarious from the moment the order filled.
Several small trades that are really one trade. The trader holds one lot each of EUR/USD, GBP/USD and AUD/USD, all long. In a dollar rally they lose together, and free margin falls three times as fast as any single chart suggests. Correlated positions make the buffer brittle, and a jittery news release with wider spreads finishes the job.
In both cases the trader could have halved position size and stayed comfortable. Sizing is the dial that fixes free margin problems, and our guide to calculating lot size for an evaluation account shows the arithmetic.
Free margin inside a prop-firm evaluation
A prop-firm account adds a second set of limits on top of the broker's. On a 10,000 evaluation with a 4 percent daily loss limit, you fail the day at a 400 loss while free margin still shows thousands. The evaluation rule bites long before the margin math does.
So treat the daily loss limit as your real free margin for the day. If the limit is 400 and you have already lost 150, your usable room is 250, whatever the platform reports. Pivex spells out the daily and total loss caps ahead of an attempt, with a static total drawdown and a daily loss limit that resets each day. The cost of a failed attempt is the fee plus the weeks spent, which is a blunt reason to size against the firm's limit.
A checklist for keeping free margin healthy
- Decide a floor before the first trade. A common approach is to keep free margin above half of equity and never let margin level fall under 300 percent.
- Size from the stop, not from the free margin. Pick the loss you accept in currency, divide by the stop distance in pips, and let that set the lots.
- Check free margin before adding, and count correlated positions as one. If the new position would push margin level below your floor, halve the size or skip it.
- Budget for spread and commission cost, since every entry charges a small amount against equity at once.
- Log the lowest free margin of each day. A patchy log of near-misses is the earliest honest warning that your sizing is too coarse.
None of this is exotic. It is mostly the humble discipline of leaving room, which feels thankless on quiet days and proves consequential on the disorderly ones.
If you want to practise this, open one modest position on a demo and watch equity, used margin and free margin move for an hour. Then apply the same habit inside a structured attempt with published limits. Pivex runs a one-step evaluation with no clock on the attempt and no minimum day count, so nothing pushes you to fill the account with trades early.
Related guides: what a margin call means in practice and how leverage works in trading.
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