What does “Free Margin” mean?
Margin can be classified as either “used” or “free”.
Used Margin, which is just the aggregate of all the Required Margin from all open positions, was discussed in a previous lesson.
Free Margin is the difference between Equity and Used Margin.
Free Margin refers to the Equity in a trader’s account that is NOT tied up in margin for current open positions.
Free Margin is also known as “Usable Margin” because it’s margin that you can “use”….it’s “usable”.
Free Margin can be thought of as two things:
- The amount available to open NEW positions.
- The amount that EXISTING positions can move against you before you receive a Margin Call or Stop Out.
Don’t worry about what a Margin Call and Stop Out are. They will be discussed later.
For now, just know they’re bad things. Like acne breakouts, you don’t want to experience them.
Free Margin is also known as Usable Margin, Usable Maintenance Margin, Available Margin, and “Available to Trade“.
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