Margin is the deposit you put up to open and hold a leveraged trading position — it is not a fee, but a portion of your own capital held as collateral. Most Australian CFD brokers deduct margin automatically from your account balance the moment you open a trade.
How Margin Works — A Practical Example
Imagine you want to buy an A$10,000 CFD position on the ASX 200. Your broker offers 20:1 leverage, which means ASIC’s retail client cap for index CFDs. In that case, your required margin is 5% of A$10,000, which equals A$500 held in reserve.
That A$500 is locked in your account for as long as the trade is open. If the ASX 200 moves against you and your account equity drops close to that A$500 threshold, your broker may issue a margin call, asking you to deposit more funds or reduce your position.
If you do not act quickly enough, the broker may automatically close part or all of your trade to stop your balance going below zero — this is called a stop-out. Understanding your broker’s stop-out level before you trade can prevent surprise closures at the worst moment.
Why Margin Matters for Australian Traders
ASIC introduced strict leverage limits for retail clients in 2021, capping leverage at 30:1 for major forex pairs and 20:1 for equity indices. These caps directly determine how much margin you must hold for each asset class. A lower leverage cap means a higher margin requirement — so your money is tied up for longer and your exposure per dollar is reduced.
This regulation was introduced to protect retail traders from over-leveraging, which was a leading cause of rapid account losses before the rules changed. Brokers holding an Australian Financial Services Licence (AFSL) must apply these limits to all retail clients. If a broker is offering you 100:1 leverage on forex without classifying you as a wholesale client, that is a red flag worth investigating before depositing any money.
Margin also interacts directly with your overall account protection. Many ASIC-licensed brokers offer negative balance protection, which means you cannot lose more than your deposited funds. To understand more about how leverage amplifies both gains and losses, see our guide on what is leverage in trading.
Margin vs Spread — What Is the Difference?
Margin is the collateral you set aside to hold a position open, while the spread is the immediate cost you pay to enter a trade — the gap between the buy and sell price. Margin is returned to you when you close the trade (assuming no losses erode it), whereas the spread is a one-way cost you never get back. Margin affects how much capital you need available; spread affects how much you pay per transaction. For most Australian traders, margin requirement is the more important factor to check when sizing a position, because it determines how many trades you can hold simultaneously with your available balance.
What to Check When Comparing Brokers
- Margin rates by asset class: Check the broker’s Product Disclosure Statement (PDS) for exact margin percentages on the instruments you plan to trade — rates vary between forex, indices, commodities and crypto CFDs.
- Margin call and stop-out levels: Some brokers issue a margin call at 100% margin level; others wait until 50%. Knowing the stop-out level in advance helps you set smarter position sizes.
- Negative balance protection: ASIC-licensed retail brokers must offer this, but confirm it is stated explicitly in the broker’s PDS before you open an account.
- Free margin visibility on platform: A good platform shows your used margin, free margin and margin level in real time. Brokers like IC Markets display all three clearly on MetaTrader 4 and 5, making it easy to monitor your exposure.
- Margin calculator tools: Use a margin calculator to work out exactly how much collateral a given position will require before you place the trade — this prevents underestimating your requirements.
See our picks for the best CFD brokers in Australia — all ASIC-licensed, all live-tested by our team.
Trading CFDs carries significant risk. 70–80% of retail accounts lose money. ASIC regulated. We may earn commission via links.