What is Used Margin?
When trading forex, margin plays a crucial role in determining how much capital you need to keep positions open. Used Margin refers to the total amount of margin that is currently being utilized across all open positions. Unlike Required Margin, which applies to a single trade, Used Margin accounts for all positions combined.
👉 Think of Used Margin as the portion of your trading funds that is “locked up” and unavailable for opening new positions.
How Used Margin Works
To better understand Used Margin, let’s first recap Required Margin:
- Every time you open a trade, a specific amount of Required Margin is set aside.
- If you have multiple open positions, each trade has its own Required Margin.
- The sum of all Required Margin across open trades is what we call Used Margin.
Example: Calculating Used Margin
Let’s say you deposit $1,000 in your trading account and decide to open two positions:
1️⃣ Buy 1 Mini Lot (10,000 units) of USD/JPY
2️⃣ Buy 1 Mini Lot (10,000 units) of USD/CHF
Each currency pair has its own Margin Requirement:
| Currency Pair | Margin Requirement |
|---|---|
| USD/JPY | 4% |
| USD/CHF | 3% |
Step 1: Calculate Required Margin for Each Trade
✅ For USD/JPY:
- Notional Value = $10,000
- Required Margin = $10,000 × 4% = $400
✅ For USD/CHF:
- Notional Value = $10,000
- Required Margin = $10,000 × 3% = $300
Step 2: Calculate Used Margin
Since both trades are open simultaneously, the Used Margin is:
📌 Used Margin = Required Margin for USD/JPY + Required Margin for USD/CHF
📌 $400 + $300 = $700
This means $700 of your $1,000 account balance is being used to maintain open trades.
Key Takeaways
✅ Used Margin is the total amount of margin currently “locked up” in all open trades.
✅ It is not available for opening new positions.
✅ The more trades you open, the higher your Used Margin will be.
✅ Managing Used Margin wisely is important to avoid Margin Calls.
Recap of Previous Margin Concepts
💡 What is Margin Trading? Learn why understanding margin is essential to forex trading.
💡 What is Account Balance? The total cash you have in your account.
💡 What is Unrealized & Realized P/L? Understand how floating and closed profits/losses affect your balance.
💡 What is Required Margin? The specific amount of money reserved per trade.
By understanding Used Margin, traders can manage risk effectively and avoid running into margin-related issues. Keep an eye on your Used Margin to ensure your trades remain open and you don’t get a margin call! 🚀