Free margin in forex trading refers to the amount of money in a trading account that is

available for opening new positions. It is the difference between the trader's equity and
the margin used for open positions. Free margin represents the funds that are not
currently tied up in open trades and can be used to initiate new trades or withstand
losses.

The formula for calculating free margin is:

Free Margin=Equity−Used Margin

Where:

 Equity: The current value of the trader's account, which includes the balance plus
or minus any unrealized profits or losses from open trades.
 Used Margin: The amount of money that is currently being used to maintain
open positions.

Understanding free margin is crucial for effective risk management. When the free
margin is low, it indicates that the trader has less cushion to withstand potential losses
from adverse market movements. If free margin approaches zero, the account may be at
risk of a margin call or stop-out, where the broker may automatically close some or all
of the trader's open positions to prevent further losses.

Traders often use the free margin to calculate position sizes and determine how much
of their available capital they can allocate to new trades while maintaining proper risk
management. It's essential for traders to monitor their free margin regularly and ensure
that they have enough margin to support their open positions without exposing the
account to excessive risk.

Free Margin is the money in your Trading Account that is available for trading.

FREE MARGIN FORMULA

FREE MARGIN = EQUITY – MARGIN of your Open Position

EQUITY FORMULA
Equity = Blance + Proft from Open Position
Equity = Balance – Loss from Open Position
Let’s say you have entered a Trade in the ff conditions.

Balance = USD 10,000

Leverage = 1:50
Margin = 2%
Exchange Rate 1.20000

You decide to buy 2 lots OF 200,000 EUR/USD at 1.20000 Exchange Rate

Units or lot x Exhange Rate

2 Lots x 1.20000 = USD 240,000

OR
200,000 x 1.20000 = USD 240,000

Remarks
So you need USD 240,000 to buy 200,000 Units of EUR or Base Currency.

How to Calculate the Required Margin? Just get the 2% of USD 240,000
2% of USD 240,000 is the required margin which is USD 4800 [Required Margin]

Another Formula to get thIS value is by Dividing the USD240,000 / Given Leverage

USD 240,000 / 50 Leverage = USD 4800 [Required Margin]

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LOSS SCENARIO

After entering a Trade for EUR/USD and the Price Fell from 1.20000 to 1.19050

1.20000
1.19050
0.00950 pips

PROFIT FORMULA – In this Case Loss

Unit x Pips = Loss
USD 240,000 x 0.00950 = $2280

FREE MARGIN FORMULA

FREE MARGIN = EQUITY – MARGIN of your Open Position
EQUITY FORMULA
Equity = Blance + Proft from Open Position
Equity = Balance – Loss from Open Position

Free Margin = (USD 10,000 – USD 2280 ) – 4800

Answer: USD 2920

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MARGIN FORMULA

How to Calculate the Required Margin? Just get the 2% of USD 240,000
2% of USD 240,000 is the required margin which is USD 4800 [Required Margin]

Another Formula to get thIS value is by Dividing the USD240,000 / Given Leverage

USD 240,000 / 50 Leverage = USD 4800 [Required Margin]

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$