In plain English
What Margin means
For a simple retail-forex calculation, required margin is often position size divided by leverage, then converted into the account currency if necessary. A broker may instead apply an instrument-specific margin rate, a fixed amount per contract, or higher requirements during volatile conditions. Futures and securities-margin rules use related but not identical systems.
Why it matters
Margin determines whether an order can be opened and how much account capacity remains after it is opened. It also provides the reference amount used by many platforms to calculate free margin, margin level, margin-call thresholds, and automatic close-out thresholds.
Example
Suppose an account opens a $50,000 position with a 2% margin requirement. The simplified required margin is $1,000 ($50,000 × 0.02). The account still has exposure to the full $50,000 position: a 2% adverse price move would produce a $1,000 loss before transaction costs.
Quick answers
Common questions
How is margin different from leverage?+
Margin is the amount set aside or required for a position. Leverage describes the relationship between that required amount and the larger position value. A lower margin requirement generally corresponds to higher leverage.
Can a broker change margin requirements on open positions?+
Its agreement and applicable rules may permit it. A higher requirement can reduce free margin or trigger a deficiency even when the market price has not moved, so the broker’s terms and instrument specifications matter.
Sources