Free Margin

Free margin is the portion of a trader’s account balance that is not currently tied up as collateral for open positions and can be used to open new trades. It represents the available funds that a broker allows a client to allocate toward additional market exposure while still satisfying the margin requirements of existing trades.

How It Works

When a trader opens a position, the broker sets aside a portion of the account’s equity as margin to cover potential losses. Equity is the sum of the account balance plus or minus any unrealized profit or loss on open trades. Free margin is calculated by subtracting the used margin from the current equity:

Free Margin = Equity – Used Margin

If the trader has no open positions, used margin equals zero and free margin equals equity. As positions are added, used margin rises and free margin falls. Most trading platforms, including MetaTrader 5 offered by STB Provider, display free margin in real time so traders can see how much buying power remains.

Why It Matters for Traders

Free margin determines a trader’s ability to initiate new trades without triggering a margin call. When free margin approaches zero, the account has little buffer against adverse price movements, and the broker may automatically close positions to protect the lent funds. Maintaining a healthy free margin level helps traders:

• Stay within risk limits and avoid forced liquidations.
• Take advantage of new opportunities as they arise.
• Manage leverage effectively, especially when using higher leverage ratios.

Example

A trader opens an account with STB Provider and deposits $10,000. The account balance is $10,000 and there are no open trades, so equity is $10,000 and used margin is $0. Free margin is therefore $10,000.

The trader then buys 1 standard lot of EUR/USD with a leverage of 1:100. The required margin for this lot is $1,000 (100,000 × 0.01). After the trade, used margin becomes $1,000. Assume the trade shows an unrealized profit of $200, raising equity to $10,200. Free margin is now:

$10,200 (equity) – $1,000 (used margin) = $9,200.

With $9,200 of free margin, the trader could open additional positions up to that amount before reaching the margin limit.

Key Takeaways

• Free margin equals equity minus used margin and shows the funds available for new trades.
• It is a key safety metric; low free margin increases the risk of a margin call or automatic position closure.
• Monitoring free margin on platforms like MetaTrader 5 helps traders manage leverage and maintain control over their account exposure.
• Keeping a sufficient free margin buffer allows flexibility to capture opportunities while protecting against adverse market moves.