What is margin in CFD trading?

Margin sounds technical, but it's really just one idea: the money you must set aside to open and hold a leveraged trade. Let's unpack it clearly, because margin is what your whole account health depends on.

Margin is your deposit for the trade

When you open a CFD, you don't pay the full position value. You put down a fraction called the margin, and the broker covers the leveraged exposure.

Margin and leverage are directly linked:

Leverage	Margin required
1:10	10% of the position
1:20	5%
1:50	2%
1:100	1%

So to open a 10,000-dollar position at 1:20 leverage, you'd need 500 dollars of margin (5 percent).

Two words you'll see: used margin and free margin

• Used margin is the money currently tied up holding your open trades.
• Free margin is what's left in your account that you can use to open new trades or absorb losses.

Think of your account like a bank balance with a portion 'frozen' to back your open positions. As trades move, that balance shifts.

A quick example

You deposit 2,000 dollars. You open a position needing 500 dollars of margin.

• Used margin: 500 dollars.
• Free margin: 1,500 dollars (plus or minus your floating profit/loss).

If your trade starts losing, your floating loss eats into that free margin. If free margin runs too low, you'll hit a margin call and eventually a stop-out — both covered in their own guides. This is the chain of events that closes traders out, so watching your free margin is essential.

Margin level: the health bar of your account

Brokers show a margin level, calculated as your equity divided by used margin, shown as a percentage. A high margin level (say 800 percent) means you have lots of cushion. A falling margin level toward 100 percent means you're getting dangerously close to a margin call. Treat it like a fuel gauge and never let it run near empty.

Why margin matters so much

Margin is what limits how many positions you can hold and how much loss you can absorb before the broker steps in. Beginners often open too many positions, tying up their margin, leaving no free margin to survive a normal dip — and then get stopped out at the worst moment.

The fix is simple: keep plenty of free margin. Don't use every dirham of buying power. Room to breathe is what keeps you in trades long enough to be right.

The bottom line

Margin is the deposit you put down to open a leveraged trade, set by your leverage ratio. Used margin backs your open trades; free margin is your cushion. Keep your margin level healthy by not over-committing, and you'll avoid the margin calls and stop-outs that end most beginner accounts. Next, let's see exactly what happens when margin runs low.