Margin represents the amount that needs to be available in your account to open and maintain a position. It acts as a guarantee required by the broker or exchange to cover possible market fluctuations.
How is margin used?
When placing an order, the platform checks if there is sufficient margin available in your real account. If there is, the order can proceed and be executed. Part of the balance will be committed while the position remains open.
Concepts found on the platform
At the top of the platform, we have Equity, which is the account’s net worth.
- Equity: Balance + Open PnL.
- Balance: Balance reported by the broker.
- Used Margin : Percentage that the used margin represents of the equity. This is also provided by the broker.
- Free Margin: The margin available for the client to place orders; if there are open orders, margin will be consumed.
What happens when margin becomes insufficient?
If losses from positions reduce the account’s net worth below the required level, the broker may request additional collateral or even close positions to manage the operation’s risk.
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