Margin level

The numerator is equity, meaning the account balance adjusted by the unrealised result on everything currently open. The denominator is used margin, the collateral held against those positions. Expressed as a percentage, the result describes how much of the collateral is still covered by the account, which is why every firm's warning threshold and stop out level are quoted against this one number.

The figure moves for two independent reasons, and separating them is the whole of the arithmetic. The numerator changes on every tick, because unrealised profit and loss is revalued continuously. The denominator changes only when a position is opened, closed, resized, or when the counterparty changes the requirement for the instrument. A margin level can therefore fall a long way with no order having been sent at all.

Three details catch readers out. A falling percentage does not necessarily mean a losing account, since opening a further position raises used margin and lowers the level immediately. The figure is undefined when nothing is open, because the denominator is zero, and platforms show it blank or as a dash rather than as an error. And it is an account level measure: it says nothing about which position is responsible, so an account near its threshold gives no indication of where the exposure sits.