Margin Level
Definition
The Margin Level is the percentage (%) value based on the amount of Equity versus Used Margin. It allows you to know how much of your funds are available for new trades.
The higher the Margin Level, the more Free Margin you have available to trade. The lower the Margin Level, the less Free Margin available to trade, which could result in a Margin Call or a Stop Out.
Trade Now
Calculation
The formula to calculate the Margin Level is:
Margin Level = (Equity / Used Margin) x 100%
Your trading platform will automatically calculate and display your Margin Level. If you don’t have any trades open, your Margin Level will be ZERO.
Importance
Margin Level is very important. Forex brokers use margin levels to determine whether you can open additional positions. Different brokers set different Margin Level limits, but most brokers set this limit at 100%.
This means that when your Equity is equal to or less than your Used Margin, you will NOT be able to open any new positions. If you want to open new positions, you will have to close existing positions first.
Maximize your profit by copy Our Trade
Example
Let’s say you have an account balance of $1,000 and you open a long USD/JPY position with 1 mini lot (10,000 units), with a Margin Requirement of 4%.
Required Margin: The Required Margin to open the position is $400 (Notional Value of $10,000 x 0.04).
Used Margin: Since this is the only open position, the Used Margin is also $400.
Equity: Assuming the position is at breakeven, the Equity is $1,000.
Margin Level: Plugging the values into the formula:
Margin Level = (Equity / Used Margin) x 100%
Margin Level = ($1,000 / $400) x 100% = 250%
In this example, the Margin Level is 250%, which is well above the typical 100% limit. This means the trader can still open new positions, as long as the Margin Level remains above 100%.
Recap
In this lesson, we learned:
The definition of Margin Level and how it represents the ratio between Equity and Used Margin.
The formula to calculate Margin Level: Margin Level = (Equity / Used Margin) x 100%.
The importance of Margin Level, as brokers use it to determine if you can open additional positions.
An example calculation of Margin Level for a long USD/JPY position with 1 mini lot.
Trade Now 