Margin Level: Equity ÷ Used Margin
Margin level tells you how far your account is from the danger line. As soon as positions show an unrealized loss, equity falls and the margin level drops with it.
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
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Text version · CFDs, lesson 5: “Margin Level: Equity ÷ Used Margin”
Margin level tells you how far your account is from the danger line. As soon as positions show an unrealized loss, equity falls and the margin level drops with it.
Margin level = equity ÷ used margin
With equity of $2,000 and used margin of $500, the margin level is 400%. If floating losses cut equity to $1,000, the level drops to 200%.
The level is the thickness of your cushion
The higher the level, the more room the account has to absorb bad moves. As it falls it hits the provider's lines: first the margin call warning, and further down the stop-out.
It's calculated on the whole account
Margin level combines all your positions: if one wins and one loses, equity reflects the total. Watching a single position, you may not see how close the account is to the stop-out line.
Key takeaways
- Margin level (%) = equity ÷ used margin × 100; equity = balance ± unrealized P&L on open positions.
- The higher the margin level, the thicker your cushion against adverse moves. Fall to the platform's line and a margin call or stop-out is triggered.
- Margin level reflects every position in the account. A winning trade offsets part of another's loss, so look at the total, not individual trades.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- With price at $100: what are equity, used margin and margin level?
- Drag the price to $80: what's the floating loss? Does the margin level drop to 200%? Did used margin change?
- Keep dragging down and find the prices where the margin level hits exactly 100% and 50%.
- Drag the price to $85, then turn on "Add a short": did equity go up or down? And the margin level? Why did used margin go up too?
Quiz and explanations
- 1. Equity is $2,000 and used margin is $500. What's the margin level?
- Answer: 400%.$2,000 ÷ $500 × 100 = 400%.
- 2. Following on, an unrealized loss drops equity to $1,000 with used margin unchanged. What's the margin level now?
- Answer: 200%.$1,000 ÷ $500 × 100 = 200%. The margin level fell because the unrealized loss reduced equity.
- 3. Which of these lowers the margin level?
- Answer: A growing unrealized loss on your positions.Bigger unrealized loss → lower equity → lower margin level. Deposits and unrealized gains both raise it.
Terms in this lesson
- equity (Equity): Account balance + current floating profit or loss.
- free margin (Free Margin): Equity minus used margin: what's left to absorb losses or open new positions.
- margin call (Margin Call): When your account drops below maintenance margin, you must add funds or your positions will be closed.
- margin level (Margin Level): Equity ÷ used margin × 100%; the lower it is, the more danger you're in.
- stop-out (Stop Out): When your margin level falls to the broker's limit (for example 50%), the system closes your positions automatically.
- unrealized P&L (Unrealized P&L): The on-paper profit or loss at today's price on shares you haven't sold yet; it moves as the price moves.
- used margin (Used Margin): The total margin tied up by all open positions in your account; it's the denominator of your margin level.