What is margin level?
Margin level is a reflection of one’s available margin determined by the ratio of one’s total exposure, open profit or loss and equity on a trading account. If a client were trading with 100:1 leverage, he/she must maintain a margin level above 1%. Should this level fall below the 1% threshold, all open positions and orders will be closed automatically. The reason for this automatic closure is that the client has exceeded his available leverage and no longer satisfies the margin requirement. Under this system, the client’s account will never overdraw (incur a negative balance) even under volatile, fast-changing market conditions. In the event a force majeure and a negative balance, the client’s account would be zeroed out, so a client will never owe the market money. To calculate margin: Account Balance +/- Open Profit/Loss x 100 = Margin Level Absolute Positions in USD Example: Trader X is long 6 standard lots of USDCHF. His account balance is $20,000 with an open loss of $1000.
