In Forex trading, margin is the small amount of money you need to set aside to open a trade.
Think of margin like a deposit.
👉 You do not pay the full value of the trade.
👉 You only put down a small part, and the broker temporarily lends you the rest.
Simple example:
- You want to trade a position worth $100
- Your broker offers 100:1 leverage
- You only need $1 as margin
📌 Margin is not a fee.
📌 Margin is not lost money.
It is just money held as security while your trade is open.
How Does Margin Work?
Margin is usually shown as a percentage (%).
| Margin Requirement | What It Means |
| 1% | $1 controls $100 |
| 2% | $2 controls $100 |
| 5% | $5 controls $100 |
👉 Lower margin = higher leverage = higher risk
Initial Margin vs Maintenance Margin
There are two important types of margin every beginner must understand.
Initial Margin
Initial margin is the minimum amount needed to open a trade.
- You open a trade
- The broker locks this amount
- You control a larger position using leverage
👉 Think of it as your entry ticket to the trade.
Maintenance Margin
After your trade is open, you must keep a minimum amount of margin in your account.
- If the market moves against you
- Your account balance drops too low
- You may receive a margin call
📌 A margin call is a warning telling you to:
- Add more funds
- Or close trades to reduce risk
Risk Management When Trading with Margin
Margin helps you trade bigger, but it can also make losses grow faster.
That’s why risk management is very important.
1. Always Use Stop Loss
A stop loss:
- Limits how much you can lose
- Automatically closes the trade if price goes the wrong way
👉 It is your safety net.
2. Use Proper Leverage
- Beginners should use lower leverage
- You do not need the highest leverage offered
📌 High leverage does not make you a better trader.
It only makes mistakes more expensive.
3. Monitor Your Trades Regularly
- Check your account often
- Watch market movement
- Do not open trades and forget them
👉 Forex is about control, not luck.
Quick Summary
- Margin = deposit to open a trade
- It is not a fee and not lost money
- Lower margin means higher leverage and higher risk
- Good margin control helps you survive longer in Forex
