Margin Terms.

Here are more margin terms.

Free Margin

DEFINITION:

Free Margin is the money that is NOT “locked up” due to an open position and can be used to open new positions. When this value is at zero or less the Margin Warning is triggered and additional positions cannot be opened.

FREE MARGIN ALSO CALLED:

• Free Margin
• Available Margin
• Usable Margin
• Usable Maintenance Margin
• “Available to Trade”

HOW TO CALCULATE:

Free Margin = Equity - Used Margin

Margin Level

DEFINITION:

Margin Level is the ratio between Equity and Used Margin. It is expressed as a percentage. For example, if your Equity is $5,000 and the Used Margin is $1,000, the Margin Level is 500%.

MARGIN LEVEL ALSO CALLED:

• Margin Indicator

HOW TO CALCULATE:

Margin Level = (Equity / Used Margin) x 100%

Margin Call Level

DEFINITION:

The Margin Call Level is the specific level (%) where if your margin level is equal or below it, you won’t be able to open any new positions. Your trading platform determines the Margin Call Level.

For example, if the Margin Call Level is 100%, this means that if your Margin Level reaches 100%, you won’t be opening any new positions. At this point, your account is now under a Margin Call.

Even though most new traders assume this means that their trade(s) may be closed, that’s not true. A Margin Call Level is just a WARNING.

MARGIN CALL LEVEL IS ALSO CALLED:

• Minimum Margin Requirement
• Minimum Required Margin

HOW TO CALCULATE:

Margin Call Level = Margin Level at X%

Stop Out Level

DEFINITION:

The Stop Out Level is the specific level (%) where if your Margin Level is equal or below it, your broker will automatically start closing your positions until the Margin Level is greater than the Stop Out Level

For example, let’s say the Stop Out Level is 50%.

This means that if the Margin Level falls below 50% a Stop Out will automatically occur and the position floating the largest loss will be liquidated automatically.

This process will be repeated until the Margin Level increases to a level above 50%.

ALSO CALLED:

• Liquidation Margin
• Margin Closeout
• Margin Close Out (MCO)
• Minimum Required Margin

HOW TO CALCULATE:

Stop Out Level = Margin Level at X%

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