Oil Leverage & Margin, Margin Required, Equity, Used Crude Oil Margin & Free margin

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

Equity : It's the total amount of capital you have in your account.

Used margin : amount of money in your account which has already been used up when buying a oil lot, this contract is the one that's displayed in open trades. As a trader you can't use this amount of money after opening a trade order transaction because you have already used it & it isn't available to you.

In other words, because your oil broker has opened up a position for you using the capital you have borrowed, you must maintain this usable margin for your trading account as a security to allow you to continue using this oil leverage he has given you.

Free margin : amount in your account that you can use to open new trades. This is the amount of money in your account that has not yet been oil trading leveraged because you have not yet opened a trade with this money - this is also very important for you as a investor because it enables you to continue to hold your open trades as will be explained below.

However, if you over use crude oil trading leverage, this free margin will drop below a certain percent at which your crude oil broker will have to close all your positions automatically, leaving you with a big loss. The crude oil broker at this point automatically closes all your open trade position because if your trade positions are left open the broker would lose the money you'll have borrowed from them.

This is why you should always make sure you've a lot of free margin. To do this never trade more than 5 percent of your crude oil account, in fact 2 percent is recommended.