Margin level
Family III · Risk
Not to be confused with margin, margin call, free margin.
Margin level is a risk metric that compares the total value of an account (equity) with the amount of funds currently locked up as collateral for open positions (used margin). It is calculated as equity divided by used margin, multiplied by 100. Brokers use this percentage to determine whether an account can open new positions or is approaching a margin call.
Calculation and interpretation
Margin level is computed as:
Margin level = (Equity / Used Margin) × 100
Equity is the account balance plus or minus unrealised profit or loss. Used margin is the sum of all margin requirements for open positions. A higher percentage indicates a larger cushion of equity relative to margin, while a lower percentage signals that a greater portion of equity is tied up as collateral.
Brokers set threshold levels for action. For example, a margin call may be triggered when margin level falls below a certain percentage, and positions may be liquidated if it drops further. These thresholds vary by broker and market conditions.
Worked example
An account has a balance of $10,000 and no open positions. It opens a position that requires $2,000 in used margin. Subsequently, the position moves in the trader's favour, generating an unrealised profit of $500.
If the position instead produced a $1,500 loss, equity would be $8,500 and margin level would be 425%. A further loss reducing equity to $2,000 would bring margin level to 100%, often a critical threshold.
Why it matters
Margin level serves as a real-time indicator of account health. It helps traders avoid margin calls and forced liquidation by showing how close the account is to broker-imposed limits. A declining margin level may prompt a trader to deposit additional funds or close positions to restore a safer ratio.
Because margin requirements and liquidation policies differ across brokers and regulatory jurisdictions, the specific margin level thresholds that trigger a margin call or stop-out are not universal.
Often confused with
- margin
- Margin is the specific amount of funds required as collateral for a position, whereas margin level is a ratio comparing equity to that margin; margin is expressed in currency units, margin level as a percentage.
- margin call
- A margin call is a broker's demand for additional funds or position reduction when equity falls below a required threshold, while margin level is the metric that triggers such a call; a margin call is an event, margin level is a continuous measure.
- free margin
- Free margin is the equity available for opening new positions (equity minus used margin), whereas margin level is the ratio of equity to used margin; free margin is an absolute amount, margin level a percentage.