The Margin Formula (with a Worked Example)
Notional value = lot size x contract size x price
Required margin = notional value / leverage
Margin level % = equity / used margin x 100
Worked example: one standard lot of EURUSD (100,000 units) at 1.0850 is 108,500 of notional. At 1:100 leverage the margin is 108,500 / 100 = 1,085.00. At 1:500 the same position needs only 217.00, but its size, and the loss a stop would take, are unchanged.
Margin for 1 Lot of EUR/USD Across Leverage
| Leverage | Margin required | Notional controlled |
|---|---|---|
| 1:30 (ESMA retail cap) | $3,616.67 | $108,500 |
| 1:100 | $1,085.00 | $108,500 |
| 1:200 | $542.50 | $108,500 |
| 1:500 | $217.00 | $108,500 |
Margin, Free Margin, and Margin Level
Used margin is the part of your equity locked up to hold open positions. Free margin is what is left, the equity you can still use to open new trades or absorb losses on the ones you have. As open trades move into profit or loss, your equity changes, and with it your free margin.
Margin level ties the two together: it is equity divided by used margin, shown as a percentage. A margin level of 500% means your equity is five times the margin in use, which is healthy. As losses eat into equity the margin level falls, and when it hits your broker margin-call threshold the broker starts protecting itself.
Leverage Caps by Regulator
How much leverage you can use depends on where your broker is regulated. Under ESMA rules in the European Union, retail forex leverage is capped at 1:30 on major pairs and lower on more volatile instruments. In the United States the NFA caps major-pair leverage at 1:50. Offshore brokers often advertise 1:500 or more, which lowers the margin per trade but does nothing to lower the risk.
The calculator lets you model any of these so you can see the trade-off directly. Higher leverage frees up margin, letting you hold more positions at once, but each position is exactly as risky as before. Regulators cap leverage precisely because cheap margin tempts traders into sizes their accounts cannot survive.
Margin Call and Stop-Out: the Mechanics
A margin call is a warning that your margin level has fallen to the broker threshold, often 100%, meaning your equity has dropped to roughly the margin in use. If losses continue and the level reaches the stop-out threshold, often 50%, the broker begins closing your positions automatically, starting with the largest loser, to stop the account going negative.
The "price move to margin call" row estimates how far the market can move against your open position before that first call, using the pip value of the position. It is a linear approximation: on some account types the true trigger shifts slightly as price moves, so treat the number as a planning guide, not a precise line in the sand.
