Held, not paid
The most common misreading of margin is treating it as money paid. Margin never leaves your account and never goes to the broker: it is set aside and blocked from opening other positions while the trade is live, then returned to available funds the moment it closes.
The real cost of a trade is something else entirely — the spread, any commission, and swap. Margin's only effect is to shrink the free margin available to you.
Leverage sets the margin, not the risk
Raising leverage only lowers the margin held. A 0.10 lot gold position loses $10 per dollar of price whether your leverage is 1:100 or 1:500 — the only difference is that the first holds $240 and the second $48.
Position size determines your loss; leverage determines how much room you have before forced closure. The full argument is in leverage and margin and leverage.
Where this term sits in the account chain
The chain has a fixed order, and each term is derived from the one before it:
Balance → (add the profit or loss of open positions) → equity → (subtract the margin held) → free margin. The ratio of equity to held margin is the margin level, the single number a broker watches to decide a margin call and then a stop-out.
Learn the definitions separately and you know what each word means without knowing the price at which your account closes. Every page in this family runs the same account through the same numbers to reach exactly that price.
The formula
Required margin = (position size × price) ÷ leverage
A worked example
The reference account used across this family: a $1,000 balance, 1:500 leverage, and a 0.10 lot buy on gold at 2,400.00 — 10 ounces, $24,000 notional.
Margin held = 24,000 ÷ 500 = $48. Every $1 of gold price is $10 of profit or loss on 10 ounces.
Raise the size from 0.10 to 1.00 lots at the same leverage and the margin held becomes $480 instead of $48, while the stop-out collapses from 2,302.40 to 2,392.40 — the position now survives a $7.60 fall instead of $97.60. Leverage did not change; only size did.
Where the same account ends up: margin call at 2,304.80, stop-out at 2,302.40. The position survives a $97.60 fall — about 4% — before the broker intervenes. Run your own numbers in the margin calculator.
Common mistakes with this term
- Treating margin as a fee, when it is a held amount returned in full at close.
- Believing higher leverage means bigger losses; leverage changes the margin held and the room before closure, while size determines the loss.
- Opening trade after trade because "there is margin available", stacking held margin and raising stop-out risk across the whole book.