Free margin is the money in your account that is not tied up holding open trades. It is what you have left to open new positions with, and — more importantly — the cushion that absorbs floating losses before your broker steps in. It is one of the most practical numbers on the terminal, because it answers the question every trader actually has: how much room do I have left?
The formula
Free margin = equity − used margin
Equity is your balance adjusted for open trades. Used margin is the deposit locked in those open trades. What is left over is free.
With no trades open, used margin is zero, so free margin equals your equity. Open a position and part of that equity is locked away as used margin; the remainder is your free margin.
What it lets you do
Free margin does two jobs at once.
First, it is your capacity to open more trades. Every new position needs its own margin, drawn from what is free. Run free margin to zero and you cannot open anything else.
Second, and quietly more important, it is your loss buffer. When open trades move against you, the floating loss comes straight out of equity — and therefore out of free margin first. As long as free margin is positive, your trades stay open. When it runs out, the margin call begins.
A worked example
Balance £10,000, no trades open — equity £10,000, used margin £0, free margin £10,000.
You open positions that use £2,500 of margin, and they currently float +£200:
- Equity: £10,000 + £200 = £10,200
- Used margin: £2,500
- Free margin: £10,200 − £2,500 = £7,700
Now the trades turn and float -£3,000 instead:
- Equity: £10,000 − £3,000 = £7,000
- Free margin: £7,000 − £2,500 = £4,500
The £3,200 swing in floating P/L came straight off your free margin. That is the buffer doing its job.
A common mistake
Traders often read a large free-margin figure as a licence to open more trades. It is closer to the opposite. Free margin is capacity and cushion at the same time, and every new position spends both — it locks away more used margin and leaves less room for the open trades to move against you. A healthy buffer is there to be kept, not filled. The account that uses all of its free margin has removed its own margin for error.
Free margin is your survival buffer, not spare cash to fill. The lower it runs, the smaller the adverse move needed to tip you into a stop-out. Empty is the margin call.
Why it matters
Free margin decides how long your positions survive a bad run. A large buffer lets trades breathe through a drawdown; a thin one means a modest adverse move tips you into a margin call and stop-out.
Portfolios of EAs are where this bites. Each system opens its own trades, each draws down its own share of free margin, and they can all move against you at once. Watching total free margin across the account tells you how much collective punishment the open positions can take before the broker intervenes.
The Karnek note
Karnek reports free margin live for each account and across a whole portfolio, so you can see how much buffer your open positions still have. It connects read-only through the investor password and can never trade the account.
More in The Basics of Trading →
Written and reviewed by the Karnek Research team. Last updated August 2026.
Educational content only - not financial advice. Past performance does not predict future results. Trading carries significant risk.