What used margin is

A total, not a rate 

The account panel reports margin as a single money amount for the whole account, in the account's currency. Every open position contributes one term to it. Opening a position adds that position's term, closing a position removes it, and an account with nothing open reports nothing against the row. That is the entire behaviour of the field, and the arithmetic behind it is addition.

Each term is the margin requirement of one contract, expressed in money rather than as a percentage. The requirement is set by the counterparty per instrument and applies for as long as that contract stays open. How a requirement is arrived at, instrument by instrument, is the subject of a later lesson in this module. For the length of this one it is taken as a given number attached to each position, because the point here is what happens when several of those numbers exist at once.

The distinction the two words carry is worth holding precisely. A margin requirement is a property of one contract. Used margin is a property of the account. One is a rate applied to a contract value, the other is a sum of money that already has every rate applied to it and nothing left to apply. Trading literature uses the bare word margin for both, which is the single most common source of confusion in this part of the account panel.

The money behind the figure has not moved. It has not been paid to anyone, it has not left the account, and it does not appear anywhere as a debit. It has been marked unavailable to support anything further while the positions it stands against remain open. What that total is measured against, and what is left of the account once it is taken, are the subjects of the two lessons immediately after this one.

One term for every open position 

An account holding two positions holds two requirements, and the panel reports their sum. The requirements are worked out independently of one another: each is a percentage of its own contract value, and neither knows the other exists. Nothing about holding several positions makes any individual requirement larger or smaller.

The two rows are worth reading side by side rather than only as inputs to the total. The second position holds four times what the first one holds, and only part of that comes from its being the larger contract. The rest comes from the requirement percentage attached to it, which is a fact about the instrument rather than about the position. A given amount of margin held therefore says nothing on its own about how much contract value stands behind it.

It moves in steps as positions open and close 

Every fill changes the total, and it changes it at the moment of the fill rather than gradually. Opening adds a term. Closing removes the whole of the term that position contributed, which is described as the margin being released. Closing part of a position releases the same proportion of its requirement and leaves the rest held.

Two things in that sequence catch people out. The first is that the release is the whole of the requirement, unaffected by whether the position closed above or below the price it opened at: the held amount and the result of the trade are separate quantities that settle in separate places. The second is that the total after the close is smaller than the total before the third position was opened, which is a reminder that the field reports a current state and keeps no history of what it once was.

Why the total can move without a ticket 

A requirement is a percentage of a contract value, and a contract value is a price multiplied by a quantity. The quantity is fixed for as long as the position is open. The price is not. On instruments where the requirement is worked out from the prevailing price, the money amount held is therefore recalculated as the market moves, with no ticket sent and nothing traded.

Which instruments behave this way follows from what their contract value is made of. A share, an index or a metal contract is valued at the price of the thing itself, so a moving price moves the contract value directly. A currency contract counts a quantity of the currency written first in the pair, so the money amount held moves with whatever rate converts that currency into the account's currency, which may be the pair on the ticket or an entirely different pair. Some instruments are specified instead as a fixed money amount per contract, and those requirements do not move with price at all.

Conventions differ here, genuinely and in both directions. One holds that a requirement should be recalculated continuously, on the grounds that collateral held against a contract worth more today should be larger today, and that a figure fixed at opening drifts away from the exposure it stands against. The other holds that a requirement fixed at the moment of opening is the more useful number, because a total that moves on its own is harder to reason about and can rise at exactly the moment an account can least absorb it. Both are in use, the choice is made per instrument and per venue rather than by the account holder, and the operative convention for any given contract is stated in its specification.

What the number is not 

Four readings of the figure are common and all four are wrong, in ways that matter more as the lessons after this one build on it.

• It is not a cost. Nothing has been charged, nothing has been paid to the counterparty, and the figure never appears as a deduction from the balance.
• It is not a limit on what a position can lose. Profit and loss are calculated on the full contract value and not on the amount held against it, so an adverse move can exhaust the whole of a requirement and losses are not limited to the amount deposited.
• It is not a measure of exposure. It is a requirement percentage multiplied by a contract value, so a smaller held total can sit against a larger contract value whenever the instruments differ.
• It is not fixed once a position is open. On the recalculating convention above, the total moves with the market between one glance at the panel and the next.

Positions that offset each other 

Opposite positions in the same instrument are the one case where the plain sum does not describe what happens. Under netting accounting only one position per instrument exists, so an opposite order reduces or closes the existing one and the requirement is worked out on whatever quantity survives. Under hedging accounting both positions exist side by side, and conventions for what is held against them differ: some specifications charge the full requirement on both legs, some charge on the larger leg only, and some apply a reduced requirement to the offset portion.

Which treatment applies is a property of the account's accounting mode and the instrument's specification rather than of the intent behind the positions, which is why two accounts holding what looks like the same book can report different totals. The reasoning runs both ways. Offsetting legs carry less directional exposure than their combined size suggests, which argues for holding less against them, and they can also be closed at different moments and different prices, which leaves an exposure the netted figure never anticipated.

Where the total appears 

A YAL account runs on one of two platforms, MetaTrader 5, and both report this total in the account summary alongside the fields derived from it. On MetaTrader 5the terminal's trade tab lists it as margin, with free margin and level immediately beneath it. That label is the ambiguous one: margin on its own is also the word trading literature uses for the per contract requirement, so read it here as the total currently held against open positions.

The figure the panel prints is calculated on the server rather than in the terminal, and it is the operative one. Adding up the requirements of the open positions by hand can land a little away from it, because each term is converted into the account's currency and rounded before the sum is taken rather than after. A small discrepancy of that kind is the rounding, not an error in either number.

Where practitioners disagree 

Beyond the two conventions already described, there is a longer running argument about what the field is good for. One tradition treats used margin as the headline number for how committed an account is, on the grounds that it is the figure the close out mechanism actually reads, and that a number the system acts on is the number worth watching. Another holds that it is a poor description of a book, because it compresses two different things, the size of the contracts and the requirement percentages of the instruments they are written on, into one figure that cannot be decompressed by looking at it.

Both are describing the same property from opposite ends, and neither has settled the argument. The field is precise about one thing and silent about the other: it states exactly how much of the account is currently spoken for, and nothing at all about how much market has been taken on. The lessons that follow build the close out mechanism on the first of those and not on the second.