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Free margin is the amount of equity in your trading account that is not currently being used as margin for open positions. It represents the funds available to open new trades or absorb floating losses. Free margin is calculated as equity minus used margin. When free margin reaches zero, you cannot open new positions and are at risk of stop-out.
Your equity is $5,000 and your open positions require $1,200 in margin. Your free margin is $3,800. You can use this to open additional positions or as a buffer against unrealized losses on your existing trades.
