What is Margin Trading?
Written by Matt Allen - Published 29th July 2026
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KEY TAKEAWAY Margin is the deposit required to open and maintain a leveraged trade. Instead of paying the full value of a position, you put down a percentage — the margin — while getting exposure to the full trade size. Because your exposure exceeds your deposit, profits and losses are magnified relative to the capital committed. |
What is margin?
Margin is the amount of money you must deposit to open a leveraged position, expressed as a percentage of the position's full value. It is not a fee or a cost — it is your own money, held against the position while it is open — but it is the capital at risk as the market moves.
Margin is the mechanism behind leverage: a 20% margin requirement means a £2,000 deposit controls a £10,000 position, giving leverage of 5:1.
What are the FCA margin rates for retail clients?
For retail clients, minimum margin rates are set by FCA rules and vary by asset class: 3.33% for major FX pairs (leverage of 30:1), 5% for major indices and gold (20:1), 10% for commodities other than gold and minor indices (10:1), and 20% for individual shares (5:1). More volatile markets carry higher margin requirements. Cryptoasset derivatives cannot be traded by retail clients in the UK and are available to professional clients only. Professional clients may access higher leverage, but without certain regulatory protections, including negative balance protection.
How does your margin requirement work once a trade is open?
To place a trade, your account must hold the margin required for that position. Once the position is open, this doesn't sit still: the value supporting your positions fluctuates with the market price, and it is this fluctuating value, measured against your margin requirement, that determines how close your account is to the close out level. Some providers describe separate 'initial' and 'maintenance' margins; at Spreadex there is a single margin requirement per position.
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QUICK FACT Margin isn't a fee — it's your own capital held against the position. But it is the capital in the firing line: every point the market moves against you comes out of it. |
What is a margin call?
A margin call is a notification that your account no longer holds enough funds to support your open positions. To resolve it, you can add funds or reduce your exposure by closing positions. Under the Spreadex Customer Agreement, the close out level is reached when your aggregate available balance is negative — at which point Spreadex has the right, but not the obligation, to close all or any of your open positions, in whole or in part, without prior notice. This is stricter than the FCA's regulatory backstop, under which positions must be closed if account equity falls to 50% of the required margin — a standard Spreadex applies to professional clients as well as retail. Positions can therefore be closed at a loss without further warning in fast-moving markets, and it is your responsibility to monitor your account at all times.
How does margin work? A worked example
Suppose you open a position on shares priced at £10, with exposure equivalent to 1,000 shares — a £10,000 position. At the FCA retail margin rate of 20% for individual shares, the initial margin is £2,000.
If the share price rises 5% to £10.50, the position gains £500 — a 25% return on the £2,000 margin. If the price falls 5% to £9.50, the position loses £500 — 25% of the margin — and the funds available in your account fall accordingly. A larger fall would erode the margin further and could trigger a margin call or automatic close-out. The gain and loss are symmetrical: margin magnifies both by the same factor.
How can you manage margin responsibly?
Monitoring your account is the foundation: profits and losses on open positions change constantly, so it is your responsibility to know where your account stands relative to its margin requirement — which you can check at any time online or via the app. Spreadex also provides tools designed to help manage exposure, including stop-losses and guaranteed stops that cap what a position can lose, and low minimum stake sizes that allow positions to be opened with limited exposure. Retail clients additionally benefit from negative balance protection under FCA rules, meaning you cannot lose more than the funds in your account.
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IMPORTANT TO KNOW Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. |
Frequently asked questions
What happens if I can't meet a margin call?
If funds aren't added and the account continues to fall, positions can be closed. Under the Spreadex Customer Agreement, the close out level is reached when your aggregate available balance is negative, giving Spreadex the right to close positions without prior notice; the FCA's 50% margin close-out rule acts as the regulatory backstop. Retail clients cannot lose more than the funds in their account due to negative balance protection.
How is margin calculated?
Margin is the position's full value multiplied by the margin rate for that market. For example, a £10,000 position on an individual share at the 20% retail rate requires £2,000 of margin. Retail rates vary by asset class under FCA rules, from 3.33% on major FX pairs to 20% on individual shares.
What is the difference between initial and maintenance margin?
Some providers quote a lower 'maintenance' margin once a trade is open. Spreadex uses a single margin requirement per position: the amount needed to place the trade, against which your account is measured — as the market moves — for close out purposes.
