Margin
The capital your broker requires you to post to open and hold a leveraged position.
Also called: margin requirement · initial margin · maintenance margin
In plain language
Margin is collateral, not a fee. Initial margin is what you must put up to open a position; maintenance margin is the minimum equity you must keep to hold it.
As a position moves against you, your equity falls toward the maintenance level. Reach it and the broker issues a margin call or liquidates the position on your behalf.
Margin requirements are not fixed. Brokers raise them during volatile periods, which can force position reductions at the worst possible time.
Why it matters
Margin defines the point where your broker takes control of your trade. That is a hard boundary independent of where you placed your stop.
Common mistakes
- Confusing margin posted with maximum loss. You can lose more than the initial margin.
- Running so close to maintenance margin that normal noise triggers liquidation.
- Not knowing whether your broker calls first or liquidates immediately.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
Using borrowed capital to control a position larger than your account balance.
A broker demand for more capital when account equity falls below the required minimum.
The price at which a leveraged position is forcibly closed because margin is exhausted.
The firm that routes your orders to the market and holds your account.
The total market value of a position — size multiplied by price.