Brokers require a minimum deposit, called a margin, to open and sustain leveraged trading positions.
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There is an inverse relationship between the margin required and the leverage offered. In other words, higher leverage allows you to control a larger position with a smaller margin.
In this guide, we will explain:
- What forex margin is
- How to calculate forex margin
- What a margin level means
- What a margin call is
- How trading on margin works
What is forex margin?
Margin is the amount of money needed to open and maintain a trade. Think of it as a loan from your broker, enabling you to trade positions larger than your account balance. It acts as collateral and is usually expressed as a percentage of the total position size. You can find Deriv’s specific forex margin requirements on our trading specifications page.
There are two types of margin:
- Used margin: The portion of your account currently allocated as collateral to support open trades.
- Free margin: The remaining capital available to open new positions.
For example, if your total account balance is USD 5,000 and your used margin is USD 3,800, your free margin would be USD 1,200, which can be used for new trades.
If you want, I can also make an even more concise, beginner-friendly version that explains margin in simpler terms. Do you want me to do that?
How to calculate margin in forex
Traders can calculate margin using Deriv’s forex margin calculator, which applies the following formula: Margin=Volume × Contract Size × Asset PriceLeverage\text{Margin} = \frac{\text{Volume × Contract Size × Asset Price}}{\text{Leverage}}Margin=LeverageVolume × Contract Size × Asset Price
For instance, if you want to trade 3 lots of EUR/USD at an asset price of 1.10 USD with a leverage of 30, the required margin would be USD 11,000: (3×100,000×1.10)÷30=11,000(3 × 100,000 × 1.10) ÷ 30 = 11,000(3×100,000×1.10)÷30=11,000
What is a margin level?
Margin level shows how much of your own capital remains in your trading account compared to the funds borrowed from your broker for leveraged trades. It’s expressed as a percentage and calculated as: Margin Level=EquityUsed Margin×100\text{Margin Level} = \frac{\text{Equity}}{\text{Used Margin}} × 100Margin Level=Used MarginEquity×100
A higher margin level means you have more available margin relative to borrowed funds, which generally indicates lower risk. Conversely, a lower margin level means you are using more borrowed funds, increasing the risk of potential losses.
What is a margin call?
A margin call is a warning triggered when your margin falls below 100%, signaling that your account equity is too low to support open positions. To address this, traders should either deposit additional funds or close some positions. On the Deriv MT5 platform, you can check your margin level under the Trade tab in the Toolbox.
If you want, I can also condense this into a beginner-friendly, step-by-step guide that makes margin, margin level, and margin calls really easy to understand. Do you want me to do that?
A stop-out level is a predefined margin threshold set below the margin call level. On Deriv, this level is 50%. If your margin falls to this point, the system will automatically begin closing your open positions one by one, starting with the trade showing the largest loss, until your margin level rises above 50%.
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For instance, if your account has 1,000 USD in equity and you open a trade requiring a 1,000 USD margin, a market move against you that reduces your account balance to 500 USD or below (50% margin level) will trigger an automatic closure of the trade.
Trading on Margin
Leverage is a powerful but double-edged tool in trading. On one hand, it allows traders to take much larger market positions than their capital would normally permit, significantly boosting profit potential when the market moves in their favor. On the other hand, leverage also amplifies losses if the market moves against you.
New traders should approach leverage cautiously. Starting with lower leverage while gaining experience can help avoid severe losses. For experienced traders, judicious use of leverage can enable strategies that would otherwise be unattainable.
Conclusion
Trading on margin requires disciplined risk management, as leverage can intensify losses if trades move unfavorably. Keeping a close eye on your margin level is essential to avoid margin calls and forced position closures.
You can practise margin trading in a demo or live account with Deriv today.
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Not profitable? Don’t worry! Join our copy trading system where we provide lower risk returns. Benefits of Joining Us:
-Lesser Risk as lot size is minimal
-Higher returns (approx. 5% to 10% monthly)
-Easy Deposit and Withdrawal with USDT using crypto wallets
-Lesser Drawdown
-Instant Support
-Invest Now and get guaranteed returns with us. DM us for more info❤️
-Start Now
*Copy Trading is free but we charge some percentage of profit as fees.*
Full VIP signals performance report for September 22–26, 2025:
