Leverage and Margin in Forex: Balance, Equity, Free Margin, and Margin Calls
Leverage lets a trader open a position larger than the funds in the account, and margin is the portion of those funds set aside to keep the position open. With 1:100 leverage, a $110,000 position needs $1,100 of margin. The account’s balance reflects closed trades, equity adds the running result of open positions, and free margin is equity minus the margin in use. When losses reduce equity close to the margin in use, the broker issues a margin call and, at a lower level, a stop-out closes positions automatically.