The Margin Level is the percentage (%) value based on the amount of equity versus the Used Margin.
Margin Level allows you to know how much of your funds are available for new trades.
The higher the level, the more Free Margin you have available to trade.
The lower the level, the less Free Margin available to trade, which could result in something very bad…like a Margin Call or a Stop Out.
How to Calculate Margin Level
Here’s how to calculate Margin Level (ML)::
ML = (Equity / Used Margin) x 100%
Your trading platform will automatically calculate and display your Margin Level.
If you don’t have any trades open, your Margin Level will be ZERO.
Margin Level is very important. Forex brokers use margin levels to determine whether you can open additional positions.
Different brokers set different Margin Level limits, but most brokers set this limit at 100%.
This means that when your Equity is equal to or less than your Used Margin, you will NOT be able to open any new positions.
If you want to open new positions, close existing positions first.
In this lesson, we learned about the following:
- Margin Level is the ratio between Equity and Used Margin. We express it as a percentage (%).
- For example, if your equity is $5,000 and the Used Margin is $1,000, the Margin Level is 500%.