Margin answers a funding question: how much money is required to support a position under the account's current rules? It does not answer how much that position can lose. Treating margin as a loss limit is a common way to misunderstand leveraged exposure.
Start with exposure
Consider an illustrative position with a notional exposure of USD 1,000. If a simple 1:50 leverage rule applied, the initial margin calculation would be USD 1,000 divided by 50, or USD 20. This simplified example leaves out currency conversion, instrument-specific requirements, tiered rules and changes in margin rates. The platform's actual requirement takes priority over a general example.
A one-percent change in the value of that USD 1,000 exposure is USD 10 before costs. Changing the leverage setting does not turn the same one-percent price movement into a smaller movement for that unchanged position. Leverage changes the funding relationship; the exposure and price movement still matter.
Read the account figures together
Balance, equity, used margin and free margin each describe a different part of the account. A written comparison should name the figure being discussed. A balance snapshot alone can leave out the effect of open positions. A margin figure alone can leave out how close the account is to its current margin thresholds.
Before a practice calculation, record the instrument, contract size, position volume, account currency and the margin requirement displayed by the platform. Then write down what the calculation excludes. This makes it possible to revisit the example later without confusing a teaching assumption with an actual account condition.
Questions to resolve before using a number
- Is the displayed amount notional exposure, required margin or a cash result?
- Does this symbol use the simple forex margin model or another calculation?
- Are the position and account currencies different?
- Are the relevant margin-call and stop-out conditions documented for the account?
- Have trading costs and a possible change in execution price been considered separately?
Use the forex calculator to explore a stated numerical example and the Help Centre for account and platform questions. A calculator estimate is not an execution quote or a guarantee that an order will be accepted.
Leveraged products can produce substantial losses. This explanation is educational and does not determine a suitable position size or leverage setting for any person.