Indices Trading Leverage and Margin, Margin Required, Equity, Used Indices Trading Margin and Free margin

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

Equity : It is the total amount of capital you have 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 the one that is displayed in the open positions. As a trader you cannot use this amount of money after opening a trade because you have already used it and it is not available to you.

In other words, because your indices broker has opened up a position for you using the capital you have borrowed, you must maintain this usable margin for you 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 positions. This is the amount of money in your account that has not yet been indices trading leveraged because you have not yet opened a transaction with this money - this is also very important for you as a investor because it enables you to continue holding your open trades as will be explained 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. The indices broker at this point closes all your position because if your positions are left open they would lose the money you have borrowed from them.

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