Initial Margin
Margin & Leverage
Initial margin is the deposit required to open a new leveraged position, determined by the instrument's margin requirement and the chosen leverage.
What is initial margin?
Initial margin is the amount of collateral a trader must have available the moment they open a new leveraged position — the entry cost of the trade in terms of locked-up funds, as distinct from the trade’s spread or commission. It is calculated from the position’s full notional value and the leverage (or margin percentage) that applies to that instrument.
Initial Margin = Notional Position Value ÷ Leverage
Different instruments often carry different initial margin requirements even at the same account leverage setting — major forex pairs typically require less margin than, say, individual share CFDs or more volatile commodities, reflecting their differing risk and liquidity profiles.
A worked example
A trader wants to open one standard lot (100,000 units) of EUR/USD at an exchange rate of 1.0850, giving a notional position value of $108,500.
| Leverage | Initial margin required |
|---|---|
| 1:50 | $2,170 |
| 1:100 | $1,085 |
| 1:200 | $543 |
| 1:500 | $217 |
Before the order can be placed, the account must have at least this much free margin available. Once the trade is opened, that amount becomes used margin and is deducted from what’s shown as free margin — it’s not spent, just reserved, and it is released again once the position is closed.
Why initial margin matters
Initial margin is the practical gatekeeper for how many positions, and how large, an account can open at any one time — it’s checked automatically by the trading platform before every order. It’s also the figure that determines how “stretched” an account becomes with each new trade: opening several positions in a row consumes initial margin from each one, cumulatively reducing free margin and pushing the account’s margin level lower even before any position has moved in profit or loss. Understanding initial margin — separate from the ongoing maintenance margin needed to keep a trade open — helps traders plan position sizing with a clear view of exactly how much capital each new trade will tie up.
Quick recap
- Initial margin is the collateral required to open a new leveraged position, equal to notional value divided by leverage.
- It varies by instrument, since different assets carry different margin requirements even at the same leverage setting.
- It becomes used margin the instant a position opens, reducing free margin accordingly.
- It’s distinct from maintenance margin, which governs whether a position can keep being held once open.