In plain English
What Margin means
In leveraged trading, margin is the amount your broker or clearing venue reserves against the position’s risk. The required margin is usually a percentage of the position’s notional value. If the market moves against you, margin can be consumed by losses and may need to be topped up to keep the position open.
Why it matters
Margin determines how much exposure you can carry and how close your account is to a forced close-out. It affects position sizing, available buying power and the point at which your broker may issue a margin call or liquidate positions. Understanding margin helps you separate trade size from account balance.
Example
If a broker requires 5% margin on a $50,000 position, the initial margin is $2,500. That $2,500 is collateral supporting the trade; it is not the maximum loss. If losses reduce equity below maintenance requirements, more funds may be needed or the position may be reduced.
Quick answers
Common questions
Is margin the same as borrowed money?+
Not exactly. Margin is the collateral you post; leverage creates the larger exposure. The broker may be extending credit implicitly, but the posted margin is the key account figure.
Can I lose more than my margin?+
Yes. In many markets, losses can exceed posted margin unless the account has protections that limit negative balances.
Sources