What is Margin Level?

Margin Level is one of the most important risk-management indicators on a trading account. It shows the relationship between the client’s own funds (equity) and the margin used, and informs the client how safe their currently open positions are.

The value is calculated using the following formula:

Margin Level = (Equity / Margin) × 100%

where:

• Equity (My trades value) – the current value of the account including floating profits and losses (Balance +/- result of open positions, swap points, rollovers and commissions),

• Margin (Used Margin / Required Margin) – the amount of funds blocked by the broker as collateral for open positions.

How to interpret Margin Level?

• the higher the Margin Level, the larger the safety buffer on the account,

• a decreasing Margin Level means that open positions are generating a loss or are using too much margin relative to the available funds.

Why is Margin Level important?

On XTB accounts, the Margin Level is continuously monitored. A decrease indicates that open positions are generating losses and the available safety buffer on the account is shrinking.

When the Margin Level falls below 30%, the Stop Out mechanism is triggered. In this situation, the system automatically starts closing open positions - first the one generating the largest loss, and after each recalculation of the Margin Level, further positions (also from the most unprofitable), until the indicator returns above 30% or all positions are closed.

What is a Margin Call?

A Margin Call is a warning indicating that the account’s collateral level is becoming insufficient to maintain open positions.

At XTB, a Margin Call occurs when the Margin Level falls below 50%. This means that open trades are generating losses and the account’s collateral level is significantly decreasing. Further deterioration may lead to automatic closing of trades under the Stop Out mechanism.

A Margin Call does not close positions yet - it is a warning signal that exposure should be reduced (e.g., by closing part of the positions) or that the account should be funded with additional capital.

Note: even before a Margin Call occurs, the client may lose the ability to open new positions. This usually happens when the Margin Level is around 100% and the Free Margin is insufficient to cover the required margin and transaction costs (e.g., the spread).

This is not a Margin Call, but only a restriction on opening new trades resulting from a lack of available funds on the account.

*Margin Level applies only to trading in CFD instruments.

What is Free Margin?

Free Margin is the portion of funds in the account that is not being used as margin for open positions. These are funds available for opening new trades or serving as a safety buffer for existing positions.

How is Free Margin calculated?

The method of calculating Free Margin depends on the current result of open positions on the account.

1. When open positions generate profit (Equity > Balance):

Free Margin does not increase with unrealized profit and is calculated as:

Free Margin = Balance − Margin

This means that unrealized profit from open positions does not increase the funds available to open new trades.

2. When open positions generate loss (Equity < Balance):

Free Margin decreases as the loss increases and is calculated as:

Free Margin = Equity − Margin

In this case, the current loss on open positions reduces the funds available on the account and brings the account closer to Margin Call and Stop Out.

• Equity (My trades value) – the current value of the account including floating profits and losses (Balance +/- result of open positions, swap points, rollovers and commissions)

• Margin (Used Margin) – funds blocked to maintain open positions.

• Balance – the account value excluding current floating profit/loss from open positions