Margin Level is a critical metric in forex trading that helps you assess your account’s risk level and determine whether you can open new trades.
1. What is Margin Level?
✔ Margin Level is the ratio of Equity to Used Margin, expressed as a percentage (%).
✔ It shows how much free margin is available to open new trades.
✔ Most brokers set a Margin Level limit of 100%—if it drops below this level, you may receive a Margin Call.
💡 Think of Margin Level as a risk indicator—if it’s too low, you might face liquidation!
2. How to Calculate Margin Level
✔ Formula:
📌 Margin Level = (Equity / Used Margin) × 100%
✔ Key points:
📌 If Margin Level > 100%, you can still open new trades.
📌 If Margin Level = 100%, you can’t open new trades.
📌 If Margin Level < 100%, you risk a Margin Call or Stop Out!
3. Examples of Margin Level Calculation
Example 1: No Open Trades (Margin Level = 0%)
🔹 You deposit: $1,000
🔹 No open positions
📌 Calculation:
✔ Equity = $1,000
✔ Used Margin = $0
✔ Margin Level = ($1,000 / $0) × 100% → 0%
📢 Since there are no open trades, Margin Level is 0%.
Example 2: Open a Trade with No Floating Profit or Loss
🔹 You deposit: $1,000
🔹 You open 1 mini lot (10,000 units) of USD/JPY
🔹 Margin Requirement: 4%
✔ Required Margin Calculation:
📌 $10,000 × 4% = $400
📌 Calculation:
✔ Equity = $1,000
✔ Used Margin = $400
✔ Margin Level = ($1,000 / $400) × 100% = 250%
📢 Margin Level is 250%, meaning you can still open more trades.
Example 3: Trade Moves Against You (Margin Level Decreases)
🔹 Same trade, but now your position has a -$300 floating loss.
📌 Calculation:
✔ Equity = $1,000 – $300 → $700
✔ Used Margin = $400
✔ Margin Level = ($700 / $400) × 100% = 175%
📢 Margin Level has dropped, but you can still trade.
Example 4: Trade Moves Against You Further (Margin Call!)
🔹 Your floating loss increases to -$600.
📌 Calculation:
✔ Equity = $1,000 – $600 → $400
✔ Used Margin = $400
✔ Margin Level = ($400 / $400) × 100% = 100%
📢 You’ve hit the 100% Margin Level limit! No new trades allowed.
🚨 You’re at risk of a Margin Call if your losses increase!
4. What Happens if Margin Level Drops Below 100%?
✔ At 100% Margin Level, your broker blocks new trades.
✔ Below 100% Margin Level, your broker may issue a Margin Call.
✔ At the Stop Out Level (usually 50% Margin Level), your broker will automatically close your losing trades.
5. How to Avoid a Margin Call
✔ Use Stop-Loss orders to manage risk.
✔ Monitor your Free Margin before opening new trades.
✔ Don’t over-leverage—use lower leverage to prevent quick losses.
✔ Deposit extra funds to maintain a healthy Margin Level.
6. Key Takeaways
✔ Margin Level = (Equity / Used Margin) × 100%
✔ Above 100% = Can open new trades
✔ 100% = No new trades allowed
✔ Below 100% = Risk of Margin Call
✔ 50% or lower = Stop Out (forced liquidation)
Managing Margin Level effectively helps prevent liquidation and ensures account safety! 🚀📉
