Used Margin is an essential concept in forex trading, as it represents the total amount of margin locked up to maintain all open positions. It plays a crucial role in managing risk and determining available margin for new trades.
1. What is Used Margin?
✔ Used Margin is the total amount of Required Margin being used for all open positions.
✔ It is the sum of the margin requirements for all trades currently open.
✔ Used Margin is NOT available for opening new trades.
💡 Think of it like a security deposit that your broker holds to keep your trades open.
2. Difference Between Required Margin and Used Margin
| Concept | Definition |
|---|---|
| Required Margin | The margin needed for a single open trade |
| Used Margin | The total margin required for all open trades |
3. How to Calculate Used Margin
📌 Formula:
✔ Used Margin = Sum of Required Margin for ALL Open Positions
Example 1: Open 2 Forex Positions
📌 Scenario:
✔ You deposit $1,000 in your account.
✔ You open two positions:
- Long USD/JPY (1 mini lot = 10,000 units)
- Long USD/CHF (1 mini lot = 10,000 units)
✔ Margin Requirements: - USD/JPY = 4%
- USD/CHF = 3%
📌 Step-by-Step Calculation: Step 1: Calculate Required Margin for Each Position
- USD/JPY:
- Notional Value = $10,000
- Required Margin = $10,000 × 4% = $400
- USD/CHF:
- Notional Value = $10,000
- Required Margin = $10,000 × 3% = $300
Step 2: Calculate Used Margin
✔ Used Margin = $400 + $300 = $700
✅ Used Margin = $700 is locked up and cannot be used to open new positions.
4. Used Margin vs. Free Margin
✔ Used Margin = Margin already being used to maintain open trades.
✔ Free Margin = The remaining balance available to open new trades.
💡 Formula:
📌 Free Margin = Equity – Used Margin
5. Why is Used Margin Important?
✔ Helps you track how much margin is locked up in open trades.
✔ Determines how much Free Margin is available to open new positions.
✔ Helps avoid Margin Calls and Stop Outs due to excessive margin usage.
6. Key Takeaways
✔ Used Margin = SUM of Required Margin for all open trades.
✔ It reduces the available margin for opening new trades.
✔ To open more trades, you need sufficient Free Margin.
✔ Keeping track of Used Margin helps manage risk and avoid Margin Calls.
Now that you understand Used Margin, the next step is learning about Free Margin, Margin Level, and Margin Calls to prevent your account from being liquidated! 🚀📉
