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Trading glossary
What Is Margin in Trading? Margin Calls Explained
Margin in trading is the deposit a broker requires you to hold against a leveraged position. It is collateral that stays in your account, not a fee. In a stock margin account, margin means money borrowed from the broker. A margin call or close-out follows when your equity falls too far below the required level.
In brief
What is margin in trading?
Margin is the collateral that supports a leveraged position. Here is how it differs from a stock margin loan, how margin level is worked out and when a broker can close your trades.
Key takeaways
- Margin in trading is collateral held against a leveraged position. It is not a fee or a commission.
- In a stock margin account, margin means borrowing from the broker. FINRA says you must maintain at least US$2,000 of equity in a margin account.
- Used margin, free margin and margin level show how much room your equity has left before a close-out.
- A margin call is a warning or a demand for funds. A close-out is the broker closing positions, which for UK retail CFDs happens at 50% of the margin needed under the FCA's permanent rules (ESMA set the same level in its temporary 2018 EU measures).
- Whether you can lose more than your margin depends on the product and the country. Read the account agreement and check your national regulator.
What margin in trading means
Margin in trading is the money you must have in your account to open and keep a leveraged position open. The broker holds it as collateral against the risk that the position moves against you. It is not a fee, a commission or a spread. When the position closes, the margin is released, adjusted for the result of the trade.
The term is used in two different ways. In a stock margin account, margin means borrowing: the broker lends you cash and uses the account as collateral. On leveraged products such as CFDs and forex, margin is a deposit that supports a larger position. The two uses share a name but work differently, so check which one a product uses before you rely on the figure.
For the idea of controlling a large position with a smaller amount of capital, read what is leverage in trading. Margin is the mechanism that makes that leverage possible.
Margin in stock margin accounts
Investor.gov defines a margin account as a type of brokerage account in which the broker-dealer lends the investor cash, using the account as collateral, to purchase securities. Margin increases purchasing power, but it also exposes investors to the potential for larger losses.
In the US, FINRA sets a minimum. Its investor page on day trading, dated 4 June 2026, says you must maintain at least US$2,000 in equity in a margin account, and that trading on margin means borrowing funds from your firm. Firms may set higher house requirements. When you trade on margin during the day, intraday margin requirements apply, and they are calculated from positions held during the trading day, not only at the end of it.
FINRA has also changed the pattern day trader rule. In the US, FINRA replaced the pattern day trader rule and its US$25,000 minimum equity requirement with intraday margin standards, effective 4 June 2026. Brokers can phase the change in until 20 October 2027, and may still apply stricter house rules. Some accounts may follow the older requirements during the phase-in, so ask your broker which rules apply to you.
- Equity is the value of the securities in the account minus what you owe the broker.
- Margin borrowing can magnify gains and losses in the same way leverage does on a derivative.
- Your broker's house requirements can be stricter than the regulatory minimum.
Margin on leveraged CFD and forex positions
On a CFD or forex position, you put up a fraction of the position's value. The required margin is the position value divided by the leverage ratio. With US$30,000 of EUR/USD exposure at 30:1, the required margin is US$1,000. Your deposit covers only that margin, so a small move against you can use a large share of it.
Leverage limits depend on the country. In the UK, the FCA's permanent rules limit retail CFD leverage to between 30:1 and 2:1. In the EU, ESMA introduced leverage limits for retail CFD clients in 2018 as temporary measures, ranging from 30:1 for major currency pairs to 2:1 for cryptocurrencies. Check your national regulator for the rules that apply to you today.
For the product itself, read what is a CFD. It explains how a contract for difference tracks an asset's price without giving you ownership of the asset.
Used margin, free margin, equity and margin level
Used margin is the margin your open positions require. Equity is your account balance plus or minus the floating profit or loss on open positions. Free margin is equity minus used margin, the amount left to open new positions or to absorb further losses. Margin level is equity divided by used margin, shown as a percentage.
The table below uses one example throughout. A US$30,000 EUR/USD position at 30:1 requires US$1,000 of used margin. The figures are illustrative, not forecasts, and your broker may label them differently.
| Equity (US$) | Used margin (US$) | Free margin (US$) | Margin level | What it means |
|---|---|---|---|---|
| 2,000 | 1,000 | 1,000 | 200% | Starting point. Equity is twice the margin used. |
| 1,700 | 1,000 | 700 | 170% | After a 1% adverse move, a US$300 loss on US$30,000. |
| 1,000 | 1,000 | 0 | 100% | Free margin is used up. No room for new positions or further losses. |
| 500 | 1,000 | -500 | 50% | Close-out point under the FCA's permanent retail CFD rules and ESMA's 2018 measure. |
Equity falls from US$2,000 to US$500 after a 5% adverse move (a US$1,500 loss on US$30,000). Free margin turns negative when equity is below the margin used.
Margin call versus margin close-out
A margin call is a demand or warning from your broker that your equity has fallen below the level it requires. Investor.gov explains that if you buy on margin and the value of your securities declines, the brokerage firm can require you to deposit cash or securities immediately, or sell securities in your account to cover the shortfall. It can do this without informing you in advance, and it can change the threshold at which a margin call applies.
A close-out is different. The broker closes some or all open positions for you when equity falls to a set level. For UK retail CFDs, the FCA's permanent rules require positions to be closed out when funds fall to 50% of the margin needed. ESMA's 2018 measure set the same 50% level for EU retail CFD clients, as a temporary measure.
- Margin call: a warning or demand to add funds or reduce exposure. The threshold is set by the broker or the account rules.
- Close-out: the broker closes positions automatically. For UK retail CFDs, the FCA's permanent rules set the level at 50% of the required margin; ESMA's temporary 2018 EU measures used the same level.
Why a margin call can come without warning
A margin call can arrive with little or no notice in a fast market. Prices can move several percent between one check and the next. A close-out may execute at the next available price rather than the level you expected, and overnight gaps, thin trading around news and wider spreads can all make the fill worse than the figure on your screen.
Your margin level is a snapshot that changes with every price movement. A position that looked comfortable at 200% can reach the close-out level before you have time to respond. Investor.gov notes that a firm can act without informing you in advance, so do not treat a margin call as the only warning you will get.
How to monitor your margin
- Read the margin requirement for each instrument in your broker's contract specification before you open a position.
- Check your margin level and free margin on the platform, and find out the close-out level your broker publishes.
- Work out the loss that would take your equity to the close-out level. In the example above, a 5% adverse move takes equity from US$2,000 to US$500.
- Keep spare equity above the margin you need, rather than using all of your free margin.
- Use a stop loss to limit losses, and remember that a stop order can fill away from its price in a fast market.
- If you trade within the day, day trading explained covers how frequent trades change the margin you use.
Risk disclosure
- Leveraged positions can lose money quickly. A small adverse move can use a large share of your margin, and losses can exceed your deposit depending on the product and the country.
- A margin call or close-out can happen at a price you did not expect, especially around news, overnight gaps and in thin trading.
- ESMA reported in 2018 that 74-89% of retail CFD accounts typically lose money on their investments. That figure is from a 2018 release and may not reflect current conditions.
- In a stock margin account, borrowing increases losses as well as gains. Investor.gov notes the potential for larger losses.
- This page is educational and is not personal financial advice. The example figures are illustrative, not forecasts, and margin trading may not suit every investor.
RTX5 status
RTX5 is Orrnn's trading terminal and broker-technology product. Its Windows desktop client is in preview, and the web and mobile clients are planned. A Google Play listing for Android is published, but the mobile client has no approved release record yet; check the product-availability record and release notes before relying on any RTX5 feature. RTX5 is not a broker and does not hold client money, so the margin rules on your account are set by your broker. The figures on this page are illustrative and do not come from an RTX5 feature.
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Primary references
Sources were checked on 7 November 2026. They explain market rules and concepts; they do not certify RTX5 or provide individual financial advice.
FCA press release: permanent restrictions on CFDs for retail consumers (1 July 2019)Retail CFD leverage between 30:1 and 2:1; positions closed out when funds fall to 50% of the margin needed; protection so a client cannot lose more than the funds in the CFD account. Effective 1 August 2019 for CFDs.ESMA press release on restricting CFDs for retail investors (27 March 2018)The 2018 temporary EU measures: leverage limits by asset class, margin close-out at 50% of minimum required margin, negative balance protection per account, and the 74-89% retail loss figure reported in 2018.FINRA: Day trading (page dated 4 June 2026)Margin accounts must maintain at least US$2,000 in equity; firms may set higher house requirements; intraday margin requirements apply when trading on margin during the day.FINRA Regulatory Notice 26-10 (20 April 2026)Intraday margin standards replace the day trading margin requirements, including the US$25,000 pattern day trader minimum equity requirement. Effective 4 June 2026; phase-in ends 20 October 2027.Investor.gov: Margin accountDefines a margin account as a brokerage account in which the broker-dealer lends cash, using the account as collateral. Margin increases purchasing power and exposes investors to larger losses.Investor.gov: Margin callIf the value of securities declines, the firm can require deposits or sell securities without informing you in advance, and can change the margin call threshold at any time.
Questions readers ask
What is a margin call?
A margin call is a request from your broker to restore your account to the level it requires, usually by adding funds or reducing positions. It is a warning that your equity has fallen toward a required level. Investor.gov notes that a firm can sell securities in a margin account without informing you in advance, and that it can change its threshold. A close-out is different: the broker closes positions when equity reaches its close-out level.
Can I lose more than my margin?
It depends on the product and the country. For UK retail CFDs, FCA rules require protection so a client cannot lose more than the funds in the CFD account. ESMA's 2018 EU measures included negative balance protection per account, as a temporary measure, so check your national regulator. For US margin accounts, Investor.gov says margin exposes investors to larger losses. The sources checked here do not confirm a negative balance guarantee, so read your broker's agreement.
Is margin the same as borrowing?
Not always. In a stock margin account, margin means borrowing: the broker lends you cash secured by the account. On a leveraged CFD or forex position, margin is a deposit held against the position, not a loan of cash to buy the asset. Financing charges can still apply to positions held overnight, so read the product terms before you open one.
What is margin level?
Margin level is equity divided by used margin, shown as a percentage. If you have US$2,000 of equity and US$1,000 of used margin, the margin level is 200%. A falling margin level means your equity is shrinking relative to the margin your positions need. Brokers set the level at which they close positions, and the figure varies by broker and product.
How much margin do I need for a trade?
Required margin is the position value divided by the leverage ratio, plus any extra amount your broker sets. A US$30,000 position at 30:1 needs US$1,000 of margin, and the same position at 2:1 needs US$15,000. Margin requirements differ by instrument, broker and country, so confirm the figure in the contract specification before you trade.
How much equity does a US margin account need?
FINRA says you must maintain at least US$2,000 in equity in a margin account, and firms may set higher house requirements. Intraday margin requirements apply when you trade on margin during the day. FINRA's US$25,000 pattern day trader minimum was replaced by intraday margin standards effective 4 June 2026, with a phase-in ending 20 October 2027, so check which rules your broker applies.
Keep learning
What is leverage in trading?How a small deposit controls a larger position, and how that magnifies gains and losses.What is a CFD?How contracts for difference track an asset's price without giving you ownership of it.Day trading explainedHow intraday trading works and why intraday margin rules matter to short-term traders.What is trading?The basics of instruments, orders, risk and the terms used across the trading glossary.