What is Margin?
Margin is the amount of money required from your account to open and maintain a leveraged position. It acts as a security deposit or collateral that ensures you can cover potential losses.
Example:
You are trading EURUSD:
Current price is at 1.1000
Contract size for one lot is 10,000 units
Your account leverage is 1:200
If you want to take 1 lot of EURUSD, the total trade size would be $11,000. With 1:200 leverage, you will need $55 (11,000 / 200) as margin. This $55 will be “locked” in your account as margin while the position is open.
What Is Margin Level?
Margin Level is a key metric that shows the health of your margin account. It is calculated as the ratio between your equity (your total account value including unrealized P/L) and used margin (the amount of margin currently tied up in open positions). This value is expressed as a percentage:
Margin Level = (Equity ÷ Used Margin) × 100%
This number helps you (and the system) determine whether you have enough funds to maintain your open trades.
Why Is Margin Level Important?
Margin Level plays a critical role in risk management, and it’s one of the most important figures to watch when trading with leverage. It helps you to manage your account exposure to avoid hitting the Margin Call and Stop Out (forced liquidation).
The table below summarizes this concept:
| Margin Level | Action |
Healthy margin | Safer as it goes higher | You can continue trading |
Margin Call | 50% | Warning triggered. You need to close some position or add more funds |
Stop Out (liquidation) | 30% | Forced liquidation by MC Markets |
By keeping your Margin Level healthy, you stay in control of your positions and avoid forced liquidation.
Example:
Let’s say you have:
Equity: $1,200
Used Margin: $600
Your Margin Level would be: (1,200 ÷ 600) × 100% = 200%
This means your equity is twice the size of your used margin, which is generally considered safe. Now imagine the market moves against you and your equity drops to $300.
Your new Margin Level would be: (300 ÷ 600) × 100% = 50%
At this point a Margin Call will be triggered as your margin level gets to 50%. A warning will be sent to your account reminding you to close some of your open positions or to add more funds to take your margin level back to normal. If no action is taken and your margin level gets to 30%, MC Markets will start closing your positions.
Final Thoughts
Understanding how margin and margin level work is essential to managing your risk effectively when trading with leverage. By keeping track of your equity, used margin, and overall margin level, you can maintain better control over your positions and avoid unexpected liquidations.
Remember, a healthy margin level not only gives you more flexibility but also protects your capital during volatile market conditions. Always monitor your account regularly and make informed decisions to keep your trading experience smooth and sustainable.