Forex Free Margin: The Formula, the Margin Level and the Broker Settings That Move Both

Free margin is the part of a trading account's equity that is not committed as margin to open positions, calculated as equity minus used margin. In MetaTrader 5, equity is the balance plus any broker credit, minus commission, plus or minus floating profit and loss, minus intraday profit the broker has blocked, and the margin level is equity divided by used margin, multiplied by 100. Free margin is the money available to open new positions. It reaches zero when the margin level reaches 100%, turns negative as losses continue, and the broker's stop-out level decides when positions are closed. The formula is fixed, but its inputs are trading conditions the broker configures: whether floating profit counts, how much margin each instrument and each hedged pair requires, the leverage of the account group, any credit on the account and the level at which a stop-out fires. Two brokers can therefore show the same positions with different free margin.

The numbers behind free margin

Every MetaTrader 5 account line carries the same figures, and free margin is the last of them to be computed. According to MetaQuotes' description of the platform's Trade tab, equity is calculated as "Balance + Credit - Commission +/- Floating profit/loss - Blocked", margin is the "money required to cover open positions and pending orders", and free margin is "the free amount of money that can be used to open positions".

The balance moves only when a trade closes or money moves in or out. Equity moves with every price tick. Used margin on most forex positions moves only when volume, leverage or the conversion rate into the deposit currency changes, so free margin falls one for one with a floating loss.

The margin figure itself depends on a calculation mode that MetaQuotes shows in the "Calculation" field of each symbol's specification. In the Forex mode the margin for one position is "Volume in lots * Contract size / Leverage", so one lot of EUR/USD with a 100,000 contract at 1:100 needs EUR 1,000. In the Forex No Leverage mode the same lot needs the full contract value, because the trader's leverage is ignored. The mode is a symbol setting, and it is the first place a broker's configuration enters the free-margin figure.

A worked example on one account

Consider a USD account on a hedging-type MetaTrader 5 server with a balance of $10,000, no credit and leverage of 30:1, the UK and Australian retail limit for major currency pairs. It holds two positions: a 1-lot buy of USD/JPY showing a floating loss of $800 and a 1-lot sell of USD/CAD showing a floating profit of $300. Both pairs have the US dollar as base currency, so each lot's margin is 100,000 divided by 30, or $3,333.33, whatever the exchange rate does.

• Equity: $10,000 minus $800 plus $300 equals $9,500.
• Used margin: two lots at $3,333.33 equals $6,666.67.
• Free margin: $9,500 minus $6,666.67 equals $2,833.33.
• Margin level: $9,500 divided by $6,666.67, times 100, equals 142.5%.

Free margin also gives the distance to the thresholds. With the margin call set at 100%, the call arrives when equity equals used margin, which is exactly the point where free margin reaches zero, after a further loss of $2,833.33. A stop-out at 50% fires when equity falls to half the used margin, $3,333.33, after a further loss of $6,166.67. For any level set in percent, the loss that reaches it is free margin plus the unprotected share of used margin: free margin plus (1 minus the level divided by 100) times used margin. Between the margin call and the stop-out, this account carries negative free margin through $3,333.33 of losses, with every position still open and no room to open a position that needs margin.

Five broker settings that change the same account's free margin

Changing one setting at a time on the account above moves free margin from about $2,500 to $9,100 without any change in the positions or the market. Three points stand out before the detail. Leverage changes used margin and leaves equity alone, so a 500:1 group shows more than three times the free margin of a 30:1 group on identical trades. Credit and the treatment of floating profit change the equity counted, and therefore free margin, without any client money moving. A hedge can cost the full margin of one lot or nothing at all, depending on the hedged-margin value in the symbol's specification.

The hedge rows add a 1-lot sell of USD/JPY at the current price. Spread, commission and swap are ignored throughout.

Floating profit and blocked profit

MetaQuotes states that, "depending on the trading conditions (defined by a broker), the equity value may or may not consider: floating profit, floating loss or floating profit and floating loss together" when free margin is calculated. A broker that counts losses but not profits stops a client from opening new positions on unrealised gains: in the example, the $300 of open profit on USD/CAD no longer counts toward new margin. A second condition works on closed trades. Under certain trading conditions, profit taken during the day is shown as "Blocked", is not included in free margin, and is deposited to the balance at the end of the trading day.

Credit

Because credit sits inside the MetaTrader 5 equity formula, $1,000 of credit raises equity, free margin and the margin level by the full amount; the example's margin level rises from 142.5% to 157.5%, and a 50% stop-out fires $1,000 later than it would on client money alone. In the UK and Australia, retail trading credits run into the inducement bans set out below.

Leverage

The group's leverage sets used margin through the Forex formula, and with it the equity at which each threshold fires. At 30:1 a 50% stop-out on the example leaves $3,333.33 of equity on the account. At 500:1 the same stop-out fires at equity of $200, after a further loss of $9,300, by which point 98% of the starting equity is gone.

Hedged positions

On a hedging account, opposite positions in the same symbol are treated as covered, and MetaQuotes notes that two margin calculation methods are possible: "The calculation method is determined by the broker." When the symbol's hedged margin equals one contract, "the margin for the two positions will be calculated as per 1 lot"; when it is zero, "no margin is charged for the hedged (covered) volume". A third option charges the larger of the buy and sell legs. With a zero hedged margin, a client close to the margin call can open an opposite position, lock the loss and release $3,333.33 of free margin for new trades without adding a cent of equity.

Margin call and stop-out levels: what the platform stores and what regulators fix

MetaTrader 5 keeps the margin call and stop-out levels as account properties. According to MetaQuotes' MQL5 reference, the minimum margin level at which Stop Out occurs "can be set in percentage or in monetary terms", and the margin call and stop-out values are read in percent or in deposit currency depending on that mode. In percent mode the thresholds scale with used margin; in money mode they are fixed amounts of equity, so the same position size meets the stop-out at a different margin level on a small account than on a large one.

When a stop-out fires with FIFO-based closing disabled, MetaQuotes' platform help states that it "causes the position having the largest loss to be closed first". Each resulting deal carries the reason code DEAL_REASON_SO, for a deal "executed as a result of the Stop Out event", which lets a back office separate forced closes from client closes in its reports.

Regulators fix part of this in their own markets, and the rest stays with the broker. Under the UK rule, the close-out arrives when equity falls to half the margin needed, which corresponds to a margin level of about 50% and a free margin of minus half the used margin. The US rule works from a minimum security deposit instead of a margin-level percentage. A broker outside these regimes sets every level itself.

The FCA's policy statement requires firms to "close out a customer's position when their funds fall to 50% of the margin needed to maintain their open positions", and ASIC's order prohibits offering "trading credits and rebates" as inducements to retail clients. According to CFTC rule 5.9, the minimum security deposit cannot be less than 2% of notional value for major currency pairs and 5% for all other pairs, and a dealer must collect more or liquidate when deposits fall short. The same currency pair under all three rulebooks, with worked close-out distances, is covered in the risk controls brokers run behind a trader's stops.

The account terms themselves are defined alongside pips, lots and swaps in forex trading definitions and who sets them, and the history of leverage caps since 2018 is traced in the guide to currency trading leverage rules.

What a back office needs to see

For a dealing or operations team, free margin is an account-level reading that only makes sense next to the settings that produced it: the account's group and leverage, any credit, and the positions behind the used margin. In WxTrade's WconneX CRM, the trading-account list puts balance, credit, margin, free margin, profit, equity and leverage on one row for each client account alongside its group, and the positions list carries a reason column beside each position's stop-loss and take-profit. WxTrade's product documentation describes market data management settings for custom leverage levels, spreads, swaps and margin rules.

Two readings deserve a permanent place on a dealing screen: accounts whose margin level sits between the margin call and the stop-out, where free margin is already negative, and account groups where credit or a zero hedged margin makes free margin look larger than client money supports. Leverage changes made before scheduled releases move used margin on every open account in the group at once; the pre-event sequence is covered in six dynamic leverage controls brokers set before news events.

Frequently asked questions

Can free margin become negative?

Yes. Free margin is equity minus used margin, so it turns negative as soon as equity falls below used margin, which is any margin level under 100%. Positions stay open until the stop-out level is reached, and the length of that negative stretch depends on leverage: on the example account at 30:1 it covers $3,333.33 of losses before a 50% stop-out, while at 500:1 it covers only $200.

Is free margin the same as available margin in forex?

The two terms describe the same figure. MetaTrader 5 labels it Free Margin, and the MQL5 property ACCOUNT_MARGIN_FREE is the "free margin of an account in the deposit currency". The figure a client sees can still be lower than equity minus margin worked out by hand, because the broker may exclude floating profit or intraday realised profit from it.

Does a floating loss reduce used margin?

No. In the Forex calculation mode, used margin depends on volume, contract size and leverage, converted into the deposit currency, so a floating loss lowers equity and free margin while used margin stays where it is. Used margin changes when a position is opened, closed or resized, when the account's leverage changes, when the rate for converting the base currency into the deposit currency moves, or when the broker changes the symbol's margin parameters.

What is a good forex margin level?

No regulator defines a good margin level; what matters is the distance between the current level and the broker's thresholds. A margin level also says nothing about size: 142.5% on a $1,000 account and on a $100,000 account is the same proportional cushion, but the loss that reaches a 50% stop-out differs a hundredfold. Brokers that set the stop-out in money rather than percent apply a fixed equity floor regardless of account size.

What does 1:100 leverage mean in trading?

It means the margin for a position is one-hundredth of its notional value, or 1%. In MetaQuotes' own example, one lot of EUR/USD with a 100,000 contract at 1:100 needs EUR 1,000. Under the US 2% security deposit for major pairs the same lot needs EUR 2,000, and under the UK and Australian 30:1 limit about EUR 3,333. Leverage changes used margin and therefore free margin; it does not change the profit or loss per pip on the position.