What is Initial and Maintenance margin?

What Are Initial and Maintenance Margins?

Initial and maintenance margins are risk management tools used in trading to protect your account from large losses. They act as a buffer between your available trading capital and the level at which your positions might be automatically closed out.

• Initial Margin:
  This is a pre-trade requirement. When you open a new position, your account must have enough available margin (cash or approved collateral) to meet the initial margin requirement for that trade, along with any other existing positions or open orders.
• Maintenance Margin:
  This is a continuous check on your account. It represents the minimum margin you must maintain to keep your current positions open. If your account falls below this threshold, your positions may be automatically closed to limit further losses.

Why Can't You Trade Up to 100% Margin Utilisation?

When placing a new trade, the platform checks not only the margin for the new order but also includes:

• The initial margin for existing open positions
• The initial margin for pending orders

Formula:

Initial Margin Requirement = New Order Margin + Existing Orders Margin + Existing Positions Margin

This prevents your account from reaching full (100%) margin utilisation just by opening new trades — leaving a buffer to reduce risk.

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Trading example

You deposit USD 10,000 in your account. You decide to buy 100,000 USDJPY. You hold no other open position(s).

Any further attempt to buy will be rejected since the initial margin available has been utilised.

How Is Maintenance Margin Utilisation Calculated?

This figure shows how much of your margin collateral is being used to support your open positions.

Formula:

Maintenance Margin Utilisation (%) =
(100 × Maintenance Margin Reserved) ÷
(Account Value + Other Collateral – Non-Marginable Collateral)

What Happens at 100% Margin Utilisation?

If your maintenance margin utilisation reaches 100%, the platform will automatically begin closing your open positions. This is to prevent your account from falling into negative balance due to market movements.

Example (EURUSD):

• Deposit: EUR 10,000
• Buy 100,000 EURUSD
• Initial Margin: EUR 1,500 (1.5%)
• Maintenance Margin: EUR 1,000 (1.0%)
• Margin Utilisation at Entry: 10% (EUR 1,000 / EUR 10,000)

Later, if your account suffers an unrealised loss of EUR 9,000, your account value drops to EUR 1,000.

• New Margin Utilisation: 100% (EUR 1,000 / (EUR 10,000 – EUR 9,000))

As a result:

• You can no longer open new positions.
• Your existing trades are at risk of being automatically closed.
• Any open orders may be cancelled.

This automatic close-out mechanism is designed to protect both you and the broker from further losses.

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