A trade can have a small opening margin requirement and still create a large loss. Margin tells you about the collateral required for exposure. Planned stop-loss risk tells you about the loss at an assumed exit. Review both before sending a manual order, enabling an EA or following a copied strategy.
The examples below are hypothetical, with simplified USD accounts and unchanged margin unless stated otherwise. They explain the account display, not a recommended leverage setting or a forecast of broker liquidation. Your broker's contract, account terms and margin calculation mode determine the real figures.
Start with equity, not just balance
Balance records settled account movements. Equity reflects the current account value including floating trading results and applicable adjustments. In a simple account with no credit or blocked charges, equity = balance + floating profit/loss. MT5 can also account for credit, commission and blocked amounts; use the platform's equity value when those apply.
A $5,000 balance with a $400 floating loss has $4,600 equity under these assumptions. The balance can remain unchanged while the capacity to support open exposure falls. In desktop MT5, the Trade tab in Toolbox shows the account state beneath the open positions.
| Account value | Calculation | Result |
|---|---|---|
| Equity | $5,000 − $400 | $4,600 |
| Free margin | $4,600 − $1,000 | $3,600 |
| Margin level | $4,600 ÷ $1,000 × 100 | 460% |
Free margin and margin level answer different questions
Free margin = equity − used margin. It is the remaining capacity after required margin, subject to the account's trading conditions. It is not a separate savings balance or a loss limit. New orders, changing margin requirements and floating losses can all alter it.
Margin level = equity ÷ used margin × 100. It compares account value with the collateral requirement as a percentage. Divide by used margin, not by balance. When used margin is zero, this ratio has no finite arithmetic value; do not interpret a blank platform field as a zero-percent account.
In our example, a further $1,600 floating loss reduces equity to $3,000. With margin held at $1,000, free margin becomes $2,000 and margin level becomes 300%. If total floating loss reaches $4,200, equity is $800, free margin is −$200 and margin level is 80%. This deliberately holds margin constant to show the effect of equity alone.
Work through a simple forex margin calculation
For a symbol using the ordinary leveraged Forex calculation mode, basic margin = lots × contract size ÷ leverage, initially in the symbol's margin currency. The result may then require account-currency conversion and an applicable margin factor. A specified initial margin or another calculation mode can change the method.
Assume a 0.20-lot EURUSD order, 100,000 EUR per lot, EUR margin currency, 1:100 leverage and no extra margin factor. Basic margin is 0.20 × 100,000 ÷ 100 = €200. At a hypothetical EURUSD conversion rate of 1.1000, that is $220 for a USD account. The order controls €20,000 of exposure; the $220 is not its maximum possible loss.
Under the same simplified assumptions, 1:200 leverage halves basic margin to €100, or $110. Yet a 0.0100 adverse EURUSD price change on €20,000 still means a $200 gross loss. Higher available leverage reduces collateral for that volume; it does not halve the movement's cash effect.
Do not apply the forex formula blindly to Gold
An XAUUSD contract can use different broker margin rules. If a hypothetical contract specifically uses leveraged CFD calculation with 100 ounces per lot, a price of $3,000 per ounce and 1:100 leverage, basic margin for 0.10 lot is 0.10 × 100 × 3,000 ÷ 100 = $300 before any conversion or margin factor. That formula requires the price term; the ordinary forex base-currency example did not.
If another hypothetical Gold contract instead specifies $5,000 initial margin per lot in USD, 0.10 lot requires $500 under that fixed initial-margin assumption. Neither example establishes your broker's Gold requirement. Read Specification and verify the proposed trade against the actual account. Price changes, conversion rates or revised requirements can change the margin displayed later.
Margin call and stop-out are account rules
A margin-call level identifies the account's warning or restricted state under its terms. Stop-out is forced closure when the account no longer satisfies its required condition. MT5 supports percentage-based and money-based settings. Do not assume every broker warns at 100%, closes at 50% or sends a message before liquidation.
For arithmetic only, suppose an account uses a 50% stop-out margin-level threshold. If used margin stays $1,000, the corresponding equity is 50 ÷ 100 × $1,000 = $500. In our no-credit $5,000 account that corresponds to a $4,500 floating loss. This is a threshold illustration, not an instruction to hold the trade until that point.
Actual liquidation can change used margin and equity as positions close. Broker rules, execution conditions and account mode affect the process. A gap can cross a threshold between observations, and a percentage calculation does not guarantee an exact loss or final remaining balance.
Review the proposed order and the existing account together
- Identify the symbol's calculation mode, contract size, margin currency and any initial/maintenance margin or additional factor.
- Read current equity and used margin, then assess what the proposed exposure adds. Include existing positions and relevant pending orders.
- Check stop-out mode and thresholds in the broker's account terms. Also inspect how hedged positions are margined; an opposite trade need not remove the requirement.
- Estimate planned loss separately from required margin. For an EA that adds orders, assess the combined exposure rather than only the first entry.
- Use a demo order check before relying on a spreadsheet estimate. MT5's OrderCalcMargin estimates one proposed order in account currency but explicitly excludes existing positions and pending orders, so it is not a complete portfolio check.
Common questions
- Is all free margin available to risk? Free margin describes account capacity under the margin rules. It does not say what loss is acceptable for your plan.
- Can a funded-looking balance hide a margin problem? Yes. Floating losses reduce equity without necessarily reducing the displayed balance, which is why balance alone is insufficient.
- Does Quantora's Position Size Calculator calculate margin? No. It estimates volume from a price distance and entered risk budget; it does not model leverage, account-currency conversion, broker margin rules or stop-out.
- Is a high margin level proof that the strategy is safe? No. The ratio describes the current account state. It does not predict the next move, a gap, another EA order or a change in margin requirements.