Indices Leverage & Margin, Margin Required, Equity, Used Indices Margin & Free margin

Margin required : It's amount of money your indices broker requires from you to open a position. It is expressed in percents.

Equity : It's the total amount of capital you've in your account.

Used margin : amount of money in your account that has already been used up when buying a indices lot, this contract is one that is displayed in open positions. As a trader you can't use this amount of money after opening a trade because you have already used it & it is not available to you.

In other words, because your indices broker has opened up a position for you using the capital you've borrowed, you must maintain this usable margin for your trading account as a security to allow you to continue using this indices trading leverage he has given you.

Free margin : amount in your account that you can use to open new trades. This is amount of money in your account which hasn't yet been indices trading leveraged because you have not yet opened a trade with this money - this is also very important for you as a trader because it enables you to continue holding your open trade transactions as described and illustrated below.

However, if you over use stock indices trading leverage, this free margin will drop below a certain percent at which your stock indices broker will have to close all your positions automatically, leaving you with a big loss. Index broker at this point will automatically close all your open trades because if your open trade positions are left open then your broker would lose the money that you would have borrowed from them.

This is why you should always make sure you've a lot of free margin. To do this never trade more than 5 percent of your stock indices account, in fact 2 percent is recommended.