Margin is the part of your account balance set aside to keep a leveraged trade open. It is a deposit, not a fee, and you get it back when the trade closes. Leverage is the ratio that decides how large that deposit is: at 1:30 you put up 1/30 of the position's value, and at 1:100 you put up 1/100.
TL;DR: Required margin = position value ÷ leverage. Free margin is what remains available for new trades, and margin level shows how much cushion you have left. Higher leverage ties up less margin, but the same position still makes or loses the same amount per pip. On prop firm accounts, daily and maximum loss limits usually matter long before a margin call does, so size trades with the lot size calculator first.
Educational content only, not a personal recommendation. Examples are illustrative. Alpha Capital accounts are simulated accounts with simulated funds, and performance fees are not guaranteed.
What is the difference between margin and leverage?
They are two views of the same thing. Leverage is the ratio; margin is the amount of money that ratio requires. A leverage of 1:100 means a margin requirement of 1%, 1:50 means 2%, and 1:30 means about 3.33%.
On a live leveraged account, the provider effectively lets you control a position much larger than your deposit, and your own money absorbs any losses. A simulated account does not involve real borrowing or real money at all, but the platform calculates margin the same way, so the numbers on your screen behave like the live version.
The formula for a forex position quoted in your account currency is:
Required margin = (lots × contract size × price) ÷ leverage
One standard lot of a currency pair is 100,000 units of the first currency. If you are new to lots and pips, our guide to what a pip is in forex covers both.
What do used margin, free margin and margin level mean?
Your platform shows these figures in the account or trade panel, and they all move together once a trade is open.
Term | What it means | How it is calculated |
|---|---|---|
Equity | Your balance including open profit or loss | Balance + floating profit or loss |
Used margin | The amount set aside for all open trades | Sum of the required margin on each position |
Free margin | What is left to open new trades or absorb losses | Equity − used margin |
Margin level | Your cushion, shown as a percentage | (Equity ÷ used margin) × 100 |
Notice that free margin and margin level use equity, not balance. A floating loss reduces both straight away, even though the trade has not closed.
Worked example: the same trade at 1:30 and 1:100 (illustrative)
You have a $25,000 simulated account and buy 0.5 lots of GBPUSD at 1.2500. The position value is 0.5 × 100,000 × 1.2500 = $62,500.
Figure | At 1:30 | At 1:100 |
|---|---|---|
Used margin | $62,500 ÷ 30 = $2,083 | $62,500 ÷ 100 = $625 |
Free margin | $22,917 | $24,375 |
Margin level | 1,200% | 4,000% |
Value of one pip | $5 | $5 |
Result if price falls 100 pips | −$500 | −$500 |
Margin level after that fall | about 1,176% | 3,920% |
This is the point most people miss. Leverage changed how much margin the trade tied up, but it did not change the profit or loss. The same 0.5 lots loses the same $500 either way.
What leverage does change is how big a position you could open. With $25,000 at 1:30, the most your margin would allow in this example is 6 lots ($750,000 of position value). At 1:100 it is 20 lots ($2,500,000). At 20 lots, a move of just 12.5 pips is a $2,500 loss, or 10% of the account. The risk comes from the extra size that higher leverage permits.
Size the trade from your risk, not from your margin: enter your account size, risk percentage, stop distance and instrument into the Alpha Capital lot size calculator, then check that the margin required fits comfortably.
Why gold needs far more margin
Margin depends on position value, and some instruments have lower leverage. One lot of gold (XAUUSD) is commonly 100 ounces. At an illustrative price of $4,000, that is $400,000 of position value, which needs about $44,444 of margin at 1:9 and about $13,333 at 1:30. On a $25,000 account, a full lot at 1:9 could not be opened at all. Contract sizes can differ, so check the specification on your platform.
What is a margin call, and what is a stop out?
Both are triggered by margin level as losses reduce your equity.
- Margin call: a warning that your margin level has fallen to a set point. You generally cannot open new trades until it recovers. Many platforms set this at 100%, where equity equals used margin and free margin is zero.
- Stop out: the point where the platform starts closing positions automatically, usually the largest losing trade first, to stop the margin level falling further. It is often set somewhere around 20% to 50%.
These levels vary by provider and account type, so treat those figures as common examples and check the account specification on your own platform. To move away from a margin call, the usual options are to close or reduce positions. A stop loss on each trade helps prevent you getting there, because it limits the loss before margin becomes the problem.
How this works under prop firm rules
Alpha Capital accounts are simulated, and the help centre notes that no capital is at risk on evaluation or Qualified Analyst accounts. Leverage still shapes what you can trade, and it depends on your plan. These are the figures from the help centre leverage article:
Plan | FX | Indices | Metals | Oil |
|---|---|---|---|---|
Alpha Pro | 1:100 | 1:20 | 1:30 | 1:10 |
Alpha One | 1:30 | 1:10 | 1:9 | 1:10 |
Alpha Swing | 1:30 | 1:10 | 1:9 | 1:10 |
Alpha Direct | 1:30 | 1:10 | 1:9 | 1:10 |
Margin is rarely the first limit you reach. Take a $25,000 Alpha Pro 6% account, which has a 3% maximum daily loss and a 6% static maximum drawdown according to the Alpha Pro 6% article. That is $750 for the day and $1,500 overall.
- Lot limit: the same article sets a maximum of 10 lots on a $25,000 account, so the 20 lots that 1:100 margin would allow in our example is not available.
- Daily loss: at 10 lots of GBPUSD, one pip is worth about $100, so a 7.5-pip move against you would reach the $750 limit.
- Margin at that point: used margin would be $12,500 and the margin level about 194%, still well above a typical margin call level.
So the account could breach its loss limit while the platform still shows plenty of margin. Daily-loss breaches are checked against current equity, including floating losses, as the daily risk limits article explains. Free margin tells you what you can open, not what you can afford to lose.
Our Alpha Capital rules explained guide covers the limits on each plan. To see how FX leverage compares between firms, read Alpha Capital vs E8 Markets.
Frequently asked questions
Is margin a fee?
No. Margin is an amount set aside while a trade is open, and it becomes free margin again when the trade closes. Costs such as spread, commission and overnight swap are separate.
Is higher leverage better?
Not by itself. Higher leverage ties up less margin and gives you more flexibility, but it also allows larger positions, and larger positions lose more per pip. The size you trade decides your risk, so work out your position from your risk per trade with the lot size calculator, rather than from the maximum your margin allows.
What is a good margin level?
There is no single target, because it depends on your positions and your platform's margin call and stop out levels. Higher is safer. If you size trades from a fixed risk per trade, your margin level will usually stay far above those levels.
What happens to margin if my trade is losing?
Used margin stays about the same, but your equity falls, so free margin and margin level both fall. If the margin level reaches your platform's margin call or stop out level, new trades may be blocked or positions closed automatically.
Do you need margin on a simulated prop firm account?
Yes, in the sense that the platform still calculates it. The account uses simulated funds rather than real borrowing, but required margin, free margin and margin level work the same way, so a trade can be rejected if there is not enough free margin.
Sources
- Alpha Capital help centre: leverage by plan
- Alpha Capital help centre: margin, leverage and equity
- Alpha Capital help centre: Alpha Pro 6%
- Alpha Capital help centre: daily risk limits
Alpha Capital Group is a proprietary trading firm based in the United Kingdom. Accounts operate in a simulated environment with simulated funds. Performance fees are performance-based and outcomes are not guaranteed.
