Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

# What is Free Margin? Forex Basics

## Forex Educational Video Series

### What is Free Margin in Forex trading?

In its simplest definition, Free Margin is the money in a trading account that is available for trading. To calculate Free Margin, you must subtract the margin of your open positions from your Equity (i.e. your Balance plus or minus any profit/loss from open positions). For example, if someone with a Balance of \$10,000 were to buy 2 lots of EURUSD at the exchange rate of 1.20000, he would need \$240,000 (200,000 X 1.2000). His required margin for this particular position would be 240,000/50 = \$4800. Now, let’s say that the price of EURUSD drops to 1.19050 after he entered the trade. This would mean that he incurred a loss of 0.00950 pips (1.20000 – 1.19050), which is equivalent to \$2280 (\$240,000 X 0.00950). So, using the Free Margin formula, the trader’s free margin in this case would be Equity (\$10,000 – \$2280) minus Margin (\$4800) = \$2920.

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Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.