Margin in Trading: Truly Understand

Many people confuse margin with fee. In reality, it's quite different. Margin is the money that the broker “freezes” in your account to hold the operation open — like a deposit.

How it works in practice

Do you want to trade $100,000? With leverage of 100:1 and a Margin of 1%, you only need to have $1,000 available. The broker holds that $1,000 while the position is open. Close the trade? The money comes back.

Formula: Margin = Contract Value × Margin Rate (%)

Example: Position of $10,000 with 0.5% margin = $50 held in the account.

Maintenance Margin: The Danger Warning

This is the most important rule. Your account needs to hold at least 50% of the initial margin blocked ( or more, depending on the broker). If the balance falls below this, automatic liquidation.

Example: Did you pay US$ 1,000 in initial margin? Your equity cannot fall below US$ 500. If it drops to US$ 400, you will receive a “margin call” — basically the broker warns: “Deposit more or we will close your position.”

The real risk

Margin and leverage amplify everything: gains AND losses. Many people burn their account by underestimating margin call. Stay alert.