What is initial margin?

Initial margin refers to the amount of capital an investor must deposit to open a leveraged trading position. This requirement is typically expressed as a percentage of the total trade value and is designed to cover potential losses. In many markets, brokers set these requirements based on factors such as the volatility of the asset, market conditions, and regulatory guidance. The initial margin serves as a safeguard against default, ensuring that traders have sufficient funds to support their positions before they trade on margin. Understanding initial margin is crucial for managing risk effectively while trading in various asset classes.