Free margin is the money in your trading account, and that money can be used for trading. To learn more about free
margin, see the
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What is Free Margin?
Free margin is money in a trading account that can be used for trading purposes. Free margin is considered a form of resilience of your money or funds.
Understanding Free Margin
Basically, margin is a deposit limit required to open trading in the market. Margin can also be said as a portion of account equity set by the broker as an account deposit limit. Free margin is a difference between Used Margin and Equity. Free margin or so-called Free Margin refers to the trader's account Equity that cannot be bound by margin for or on current open positions. Free margin shows the funds in the customer's account and can be used to open positions and the balance available for withdrawal. Free margin is also known as "
Usable Margin" or used margin.
How to Calculate Free Margin
Free margin can refer to the amount of funds available in a trading account to open the trade itself. To distinguish between Margin and Equity used in a trading account and measured using this formula: Free Margin = Equity - Margin you use If you open a position on a trading account that is currently in profit, it will develop the existing Equity in turn and will increase the Free Margin itself.
Calculate Equity
To calculate equity see the example below: Assume you deposit $1000 in a trading account, then you have no open positions, then how much is the free margin? If there is none and no open positions, then calculating Equity will be easy. Namely: Equity = Balance in Account + Unrealized Profit/Loss $1,000 = $1,000 + $0 Equity means the same as the balance or funds you have. Because you have no open positions, you will not have any unrealized profits or losses (floating profits).
Hitung Free Margin
To calculate the free margin see below: If you already know the equity, now you only need to know the free margin. As in the example where there are no open positions, the margin used will be 0.
Use the formula Free Margin = Equity - Margin used.
Then let's look at an example with open commerce.
On a 10,000 USD account, let's try opening 1 lot in USDJPY. Since USD is the base currency in this pair, 1 lot = 100,000 USD.
Let's calculate the required Margin: Assuming the margin qualification in USDJPY is 1%, then you can use the following formula to calculate the required margin. Margin required = Trade size (in units) x Margin % or Trade size (in units) / Leverage So, the margin required to open a trade is 100,000 x 0.01 = 1,000 USD
Then calculate the Margin used: Pay attention to the formula below to calculate the margin used: Calculating Equity In this example, let's assume that since opening the trade, the price has moved slightly in the desired direction, which will cause the position to be at full point and means floating profits are 0. Using this formula, you can calculate Equity = Balance + Credit + Profit/loss + Swap + Commission Equity = 10,000 + 0 + 0 + 0 + 0 Equity in the account is 10,000 USD. Next Calculating Free Margin To calculate the free margin, use the formula: Free Margin = Equity - Margin. Free Margin = 10,000 – 1,000 So, the free margin is 9,000 USD
Understanding Margin Level
Margin level is a percentage value based on the amount of Equity versus Margin used. Margin level allows you to know how much of your money is available for new trades. So the higher the margin level, the more free margin you have to trade. So the lower the Margin Level, the less margin you have to trade and that can lead to something very and quite bad, such as Stop Out or Margin Call. Margin Level describes how "healthy" your trading account is. It is the ratio of Equity to Margin used in open positions, expressed as a percentage.
How to Calculate Margin Level
To calculate your Margin Level, you can see the formula below: Margin Level = (Equity / Margin Used) x 100% The trading platform you have will automatically display and calculate your Margin level.
Calculate Equity
To calculate the equity let's assume that the price has moved a little bit and has a profit and the current position is trading at breakeven. This means that the Floating Profit is $0. Then let's calculate the Equity: Equity = Balance in Account + Floating Profit $1,000 = $1,000 + $0 The equity in the account now means $1,000.
Calculate Margin Level
After knowing the equity value, then we can calculate the Margin Level: Margin Level = (Equity / Margin used) x 100% 250% = ($ 1,000 / $ 400) x 100% Then the Margin Level is 250% So, if the margin level is 100% or less, then most trading platforms do not allow you to open a new trade. For example, because your current margin level is
250 percent which is far above 100 percent, then you can still open a new trade. That is an explanation of free margin, hopefully it can help you understand more about what free margin is. Let's show your trading skills by registering at GICTrade, trade now !!!
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